The Treasury Department, Federal Reserve and FDIC rolled out the government's latest program to shore up confidence in the nation's banking system Tuesday morning. A speech by the president on Tuesday was followed by a joint press conference in which Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila C. Bair all participated. All three stressed that although they found the decision to take equity stakes in banks distasteful, there was no other choice.
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"We regret having to take these actions," Paulson said.
"They are not what we want to do, but what we have to do to save the
economy. The alternative of leaving businesses and consumers without
financing is unacceptable. ... These are unprecedented measures that we
thought would never be necessary, but they are in order to get out
economy back on an even keel."
"The government owning a stake in any private U.S. company is
objectionable to most Americans -- me included," Paulson said. "Yet the
alternative of leaving businesses and consumers without access to
financing is totally unacceptable.
"Without confidence that their most basic financial needs will be met,
Americans lose confidence in our economy, and this is unacceptable," he
commented.
Paulson also gave some more details of the Treasury plan including:
- Institutions that sell shares to the government will accept
restrictions on executive compensation, with a "clawback provision and
ban on golden parachutes."
- Taxpayers own shares that should be paid back with a reasonable
return, and will receive warrants for common shares in participating
institutions.
"Time and time again our nation has faced adversity and time and time
again we have overcome it and risen to new heights," Paulson said.
"This time will be no different."
- George White
See transcript of Paulson comments
See Dealscape post on Bush speech
See Dealscape post on equity stakes
