Last week the President and the Treasury Department focused on ensuring that homeowners take advantage of the President’s Homeowner Affordability and Stability Plan to keep people in their homes and stabilize the mortgages that underlie the assets involved in the financial crisis. This morning the President and the Treasury unveiled the plan to unlock the credit markets, one of the most complex and intractable obstacles to economic recovery. Treasury Secretary Tim Geithner penned an extensive op-ed in the Wall Street Journal, and posted a detailed explanation of how the plan will function on the Treasury Department’s website. The President spoke to the press about the plan this morning after receiving the Economic Daily Briefing in the Roosevelt Room:
As I've said before, there are a number of legs in the stool in the economic recovery. Step one is making sure that we had a stimulus package that was robust enough to fill the huge gap in demand that was created by the recession. Step two was making sure that we had a effective homeowners' plan to try to keep people in their homes and to stabilize the housing market. Because of the work that's already been done, you are starting to see glimmers of hope in the housing market that stabilization may be taking place. Mortgage rates are at a very, very low level, and you're starting to see some activity in the housing market.
We then took a series of steps to improve liquidity in what had been secondary markets that had been completely frozen. And we are now seeing activity in student loans and auto loans. We announced last week a small-business initiative that ensures that we have more activity and you start seeing small businesses being able to get credit again in order to sell products and services and make payroll.
And this morning, Secretary Geithner announced the latest element in this multi-pronged approach, and that is a mechanism that he, in close consultation with the Federal Reserve and the FDIC, has initiated in order to allow banks to take some of their bad assets off their books, sell them into a market, but do so in a way that doesn't just obligate taxpayers to buy at whatever price they're willing to sell these assets; instead, involves a public-private partnership that allows market participants who have every interest in making a profit to accurately price these assets so that the taxpayers share in the upside as well as the downside.
And we believe that this is one more element that is going to be absolutely critical in getting credit flowing again. It's not going to happen overnight. There's still great fragility in the financial systems. But we think that we are moving in the right direction. And we are very confident that, in coordination with the Federal Reserve and the FDIC, other relevant institutions, that we are going to be able to not only start unlocking these credit markets, but we're also going to be in a position to design the regulatory authorities that are necessary to prevent this kind of systemic crisis from happening again.
(President Barack Obama, left, flanked by Treasury Secretary Timothy Geithner, and Federal Reserve Chairman Ben Bernanke, and Vice President Joseph Biden, right, receive an Economic Briefing, Monday, March 23, 2009, in the Roosevelt Room of the White House in Washington. White House Photo by Chuck Kennedy)