Tag: banks
Kissinger: Obama primed to create ‘New World Order’ Policy guru says global upheaval presents ‘great opportunity’
by admin on Mar.12, 2009, under Uncategorized
Posted: January 06, 2009
9:07 pm Eastern
By Drew Zahn
2009 WorldNetDaily
Henry Kissinger
Conflicts across the globe and an international respect for Barack Obama have created the perfect setting for establishment of “a New World Order,” according to Henry Kissinger, the Nobel Peace Prize winner and former secretary of state under President Nixon.
Kissinger has long been an integral figure in U.S. foreign policy, holding positions in the Nixon, Ford and Reagan administrations. Author of over a dozen books on foreign policy, Kissinger was also named by President Bush as the chairman of the Sept. 11 investigatory commission.
Kissinger made the remark in an interview with CNBC’s “Squawk on the Street” hosts Mark Haines and Erin Burnett at the New York Stock Exchange, after Burnett asked him what international conflict would define the Obama administration’s foreign policy.
Read “Hope of the Wicked,” where author Ted Flynn reveals the greatest deception in modern history – corporations, foundations and governments converging to bring about a New World Order.
“The president-elect is coming into office at a moment when there is upheaval in many parts of the world simultaneously,” Kissinger responded. “You have India, Pakistan; you have the jihadist movement. So he can’t really say there is one problem, that it’s the most important one. But he can give new impetus to American foreign policy partly because the reception of him is so extraordinary around the world. His task will be to develop an overall strategy for America in this period when, really, a new world order can be created. It’s a great opportunity, it isn’t just a crisis.”
Kissinger’s comments are captured at roughly the two-minute mark of the following video:
The phrase ‘new world order’ traces back at least as far as 1940, when author H.G. Wells used it as the title of a book about a socialist, unified, one-world government. The phrase has also been linked to American presidents, including Woodrow Wilson, whose work on establishing the League of Nations pioneered the concept of international government bodies, and to the first President Bush, who used it in a 1989 speech.
“A new partnership of nations has begun, and we stand today at a unique and extraordinary moment,” said Bush before a joint session of Congress. “Out of these troubled times, our fifth objective – a new world order – can emerge: A new era … in which the nations of the world, east and west, north and south, can prosper and live in harmony.”
The phrase “New World Order” causes alarm for many Americans, particularly those concerned about an international governing body trumping U.S. sovereignty or those that interpret biblical prophecy to foretell the establishment of a one-world government as key to the rise of the Antichrist. Conspiracy theorists, too, have latched on to the phrase, concerned that powerful financial or government figures are secretly plotting to rule the world.
Kissinger’s ties to government and international powers – as well as his use of the phrase – have made him suspect in the eyes of many who are wary of what “new world order” might actually mean.
“There is a need for a new world order,” Kissinger told PBS interviewer Charlie Rose last year, “I think that at the end of this administration, with all its turmoil, and at the beginning of the next, we might actually witness the creation of a new order – because people looking in the abyss, even in the Islamic world, have to conclude that at some point, ordered expectations must return under a different system.”
As WND reported, Kissinger was also part of last year’s super-secret Bilderberg Group, an organization of powerful international elites, including government, business, academic and journalistic representatives, that has convened annually since 1954.
According to sources that have penetrated the high-security meetings, the Bilderberg meetings emphasize a globalist agenda and promote the idea that the notion of national sovereignty is antiquated and regressive.
CNBC’s Haines concluded the Kissinger interview by asking, “Are you confident about the people President-elect Obama has chosen to surround him?”
Kissinger replied, “He has appointed an extraordinarily able group of people in both the international and financial fields.”
Martial Law enacted…if Bailout didn’t pass
by admin on Mar.11, 2009, under Uncategorized
Rep. Brad Sherman Martial Law
Paulson Was Behind Bailout Martial Law Threat !!!
Sen Sanders We Need A REAL Investigation Into Who Caused This Economic Collapse
by admin on Mar.11, 2009, under Uncategorized
Sen Sanders questions Fed Chairman Bernanke, March 3, 2009
by admin on Mar.11, 2009, under Uncategorized
The Federal Reserve is Bankrupt How Did It Happen and What are the Ugly Consequences?
by admin on Mar.11, 2009, under Uncategorized
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By Matthias Chang
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Global Research, March 10, 2009
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The Federal Reserve is bankrupt for all intents and purposes. The same goes for the Bank of England! This article will focus largely on the Fed, because the Fed is the “financial land-mine”. How long can someone who has stepped on a landmine, remain standing – hours, days? Eventually, when he is exhausted and his legs give way, the mine will just explode! The shadow banking system has not only stepped on the land-mine, it is carrying such a heavy load (trillions of toxic wastes) that sooner or later it will tilt, give way and trigger off the land-mine![1] In a recent article, I referred to the remarks of British Prime Minister Gordon Brown and President Obama calling for the shadow banking system to be outlawed. Even if the call was genuine, it is too late. The land-mine has been triggered and the explosion cannot be averted under any circumstances. The only issue is the extent of the damage to the global economy and how long it will take for the world to recover from this fiasco – a financial madness that has no precedent. The great depression is “Mary Poppins” in comparison! The idea of a central bank going bankrupt is not that outlandish. I am by no means the first author who has given this stark warning. What underlies this crisis (which I initially examined in an article in December 2006) is the potential collapse of the global banking system, specifically the Shadow Money-Lenders. Nouriel Roubini, the New York University professor said [2]:
Please read the underlined words again. “Sovereign bank” means central bank. When a central bank “cracks” i.e. becomes insolvent, “all hell breaks lose”, because as the professor correctly pointed out, “any government guarantees will ring hollow and will be useless”. If a central bank goes belly up, it is as good as the government going bankrupt. Period! In another article, Roubini admitted that the pressure on “the financial land-mine” is totally unbearable. He wrote: “The US Financial system is effectively insolvent”. It follows that if the financial system is bankrupt, it is a matter of time before the “sovereign bank” goes belly up. This is a given! He stated further that:
McClatchy newspaper reported (03/08/2009) bad news affecting the banks:
Berkshire Hathaway Chairman, Warren Buffett is so livid by the sheer magnitude of the financial mess that he said:
The above bad news refers to the losses and potential losses that the big banks have suffered and will suffer in the near future. But what is overlooked by many financial analysts is that these very same derivative products have caused another financial organ failure. And there is no way that the said organ can be resuscitated to its former state of health.
The Repo Market is gridlocked! There has been an incestuous relationship between the traditional banking system and the shadow banking system and the link that joined the two together is the Repo Market.[Repurchase Market] This is in fact the weakest link in the entire financial system. This is a very technical subject and I seek your indulgence and patience when reading the remaining part of this article. The gridlock of the repo market is the basis for my assertion that over and above the aforesaid dire financial facts, it is the major contributing factor to the bankruptcy of the Federal Reserve! I want to use a simple analogy. This will make the issue easier to understand. Picture a one-inch diameter thick rope. Such a rope is made up of a few strands of narrower ropes, say 1/10th inch which are twined together to make the thick one-inch diameter rope. Picture again that all the outer strands have been burnt away, and what remains is the middle strand, still lifting the weight. But this strand cannot on its own, lift such a weight and sooner or later, it will snap. When that happens, the weight will come crashing down! The middle strand is the repo market. Alternatively, you can use the analogy that the repo market is the heart that pumps the blood (the cash flow). The financial system is the body and it has suffered a massive heart attack! What is the repo market? The repo market is the market whereby all financial institutions (regulated and unregulated) invariably go to obtain financing to meet reserve requirements, bridging finance, to lend or purchase securities, to hedge and or to invest on short-term basis. It used to be that mainly US Treasuries (bear this in mind at all times) were used as security for Repo transactions, as it is considered as most secure i.e. as good as cash since it is backed by the credit of the US government! This requirement is no longer the case. More of this issue later. The Nature of Repo Transactions In repo transactions, securities are exchanged for cash with an agreement to repurchase the securities at a future date. The securities serve as collateral for what is effectively a cash loan. A distinguishing feature of repos is that they can be used either to obtain funds or to obtain securities. As repos are short-maturity collateralized instruments, repo markets have strong linkages with securities markets, derivative markets and other short term markets such as inter-bank and money markets. [3] Like other financial markets, repo markets are subject to credit risks, operational risks and liquidity risks. However, what distinguishes the credit risks on repos from that associated with uncollateralized instruments is that repos credit exposures arise from volatility (or market risk) in the value of collateral. Bear this in mind at all times. Repos allow institutions to use leverage to take larger positions in financial markets which could add to systemic risks. Bear this in mind at all times. And because of the close linkages between repo markets and securities markets, any shocks will be transmitted quickly, resulting in a gridlock. Bear this in mind at all times. Transactions covered by definition of repos are as follows:
(A) Repurchase Agreement A repurchase agreement involves the sale of an asset under an agreement to repurchase the asset from the same counter-party. Interest is paid on the repurchase agreement by adjusting the sale and purchase price. A reverse repo is the purchase of an asset with an agreement to re-sell the same or a similar asset.
A hold-in-custody repurchase agreement is a trade whereby the repoer (the borrower of cash) continues to hold the collateralizing securities in custody for the lender of cash. The risks are obvious!
A deliver-out repurchase agreement is where securities are delivered to the cash lender for custody in exchange for cash.
A tri-party repurchase agreement is similar to a deliver-out repurchase agreement, except that the security is placed in the custody of a third-party entity. The third-party ensures that the security meets the cash lender’s requirements and provides valuation and margining services. This is the primary form of repurchase agreement for securities dealers in the United States. Bank of New York and JP Morgan Chase are the two main custodians or clearing banks in the US and supervise the vast majority of the tri-party repos. Bear this in mind at all times.
(B) Sell/Buy-Back Agreement A sell buy-back is two distinct outright cash market trades, one for forward settlement. The forward price is set relative to the spot price to yield a market rate of return.
(C) Securities Lending This is where the owner of the security lends them to another person in return for a fee. The borrower of the security is contractually obliged to redeliver a like quantity of the same securities, or return precisely the same securities. Repos can be of any duration but are most commonly over-night loans. Repos longer than over-night are called Term Repos. There are also Open Repos which are transactions which can be terminated by both parties on a day’s notice. The largest players of repos and reverses are the dealers in government securities. There are about 20 primary dealers recognised by the Fed which are authorised to bid for new-issued treasury securities for resale in the market. The dealers are highly leveraged, 50 to 100 times their own capital. To finance the purchase of treasury securities, the dealers need to have repo monies in large amounts on a continuing basis. The institutions that supply such huge funds in the repo market are money funds, large corporations, state and local governments and foreign central banks. The Repo Market and the Financial Crisis As stated earlier when the repo market first started, US treasuries were the preferred security. But when financial engineering exploded and many financial products (i.e. CDOs) were rated AAA by rating agencies, these securities were also traded as described above in the repo market. This was when problems started. According to Gary Gorton [4], the repo market before the crisis was estimated to be worth a whopping $12 trillion as compared to the total assets in the entire US banking system of $10 trillion. The former CEO of Federal Reserve Bank of New York (NYFRB) and now the US Treasury Secretary, Tim Geithner observed in 2008:
Economic historians will argue for another century as to the cause for the run on the repo market. The collapse of Bear Stearns is as good a starting point as any. When the market discovered that its securities were duds, pure junk, shock waves ripped through the system. Recall that I had mentioned earlier that Federal Bank of New York and JP Morgan Chase were the primary clearing banks for repos. The Fed’s rescue of Bear Stearns through JP Morgan was not so much to save the former but rather to shore up the “clearing system” of the repos for which JP Morgan Chase and the Bank of New York were the main pillars. One of the functions of a “clearing bank” for repos is to value and match securities tendered for cash borrowings. If Bear Stearns securities are now valued as junks, the integrity of JP Morgan and Federal Bank of New York as clearing banks in this market is as good as zero! And bearing in mind that the five major investment banks in the US rely heavily on the repo market for their funding, any gridlock in this part of the shadow banking system would tear wide open the entire banking system, including the traditional counter-part. Hence, the FED intervention by the creation of the Primary Dealer Credit Facility (PDCF) which was in effect the backstop for all investment banking using tri-party repos! This was what Bernanke said:
Louis Crandall, economist at Wrightson ICAP observed:
The inherent weakness of tri-party repos is that the counter-party risks of billions worth of funding agreements are shouldered by essentially two players – Federal Bank of New York and JP Morgan Chase. Yet, way back then, they were held up as rock solid. It is almost hilarious to read the then advert of the Federal Bank of New York as to their expertise and service:
Panic swept across the entire repo market. No securities were considered safe enough for repos except US treasuries. Fundings in the repo market grind to a halt. Market players withdrew funds and began hoarding treasuries. The rest who own structured products were slaughtered. I would like to quote Gary Gorton again:
This change led to a sharp increase in the demand for government securities for repo transactions, which was compounded by significantly higher safe-haven demand for US Treasuries and the increased unwillingness to lend such securities in repo transactions. As the crisis unfolded, this combination resulted in US government collateral becoming extremely scarce. [6] I will now turn to the issue of the FED’s solvency. As has been observed, the Fed intervened aggressively to check the run on the repo market. Various measures were taken, but in my view the most dangerous was the widening of the collaterals which the Fed was willing to accept to secure funding of the players in the repo market. The Fed also intervened by lending a huge chunk of its US treasuries in exchange for junks to facilitate credit expansion.
In the result, what happened was that the Fed’s present balance sheet of approximately $2 trillion is made up mostly of junk securities. The Fed is no different from banks in that confidence in the quality of its assets is critical and that if and when the market recovers, there is in fact a market for the junk assets that it took on to unravel the gridlock in the financial markets. By way of analogy, if your high street bank’s balance sheet is made up of junk, what would you do? There are just not enough assets to meet its liabilities. But of course, one can argue that the Fed is not your high street bank. It is the central bank of the mighty USA. It will always be able to “print money” or “digitalise” money and keep the markets going. But beware that the Federal Reserve Note is mere paper, fiat money which cannot be redeemed for anything tangible such as gold. And although it is stated boldly in the notes issued - “In God we trust” - you and I are not actually placing our trust in God when accepting the Federal Reserve Notes as “money”. When Joe Six-Packs realises that the Federal Reserve Note is not even secured by US treasuries and or the FED has real tangible assets, but its balance sheet is littered with junks and toxic waste, there will be a run on the Fed i.e. when Americans and foreigners no longer have faith in the Federal Reserve Notes as “money”. If confidence could vaporise in a second and cause a stampede in what was once considered solid security, the triple A rated bonds in the repo and money markets, the same confidence that is now reposed in the Federal Reserve Notes can likewise disappear into the memory hole. All these years, the con was maintained by the Fed that it was solid because it has on its balance sheet over $800 billion of US treasuries i.e. its notes “were so-called backed by these treasuries”. It could sell its treasuries in the repo market for cash and thereby control the money flows in the economy and vice versa. In their subconscious mind, Americans and stupid foreign central banks and their executives (brain-washed by the Chicago School of Economics) somehow believe in the infallibility of the Fed. Now it has been exposed that the Fed’s “assets” comprise of junk bonds and toxic wastes. The Emperor has no clothes! Paul Volcker, former Chairman of the Federal Reserve may have given the ultimate epitaph: “The bright new financial system – for all its talented participants, for all its rich rewards – has failed the test of the market place.” And it is any wonder that Professor Nouriel Roubini declared:
In my opinion, the Fed has already become “unglued”. Whatever guarantees given to secure the indebtedness of CitiGroup and others to prevent a run on these banks are useless. It is bankrupt! End Notes [1] There are two banking systems in existence today. The Traditional Banking System – i.e. High Street banks and the Shadow Banking System. But the players in both the systems overlap because, the major banks of the traditional system helped spawn the shadow banking system. In fact they are the key players in the use of the so-called “new financial products, the CDOs, CLOs, MBS” etc and which have now turned toxic – worthless, junk to be exact. Matthias Chang is a prominent barrister, author and analyst of the New World Order based in Malaysia.
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Many Investors Have More to Gain by Letting Your Mortgage or Company Fail
by admin on Mar.09, 2009, under Uncategorized
by Susanne Trimbath 03/05/2009
I hate to say “I told you so” but… I told you so. The holders of the credit default swaps (CDS) have more to gain from the failure of the borrower than from accepting payments.
Bloomberg is reporting a strategy at Citigroup, Inc. to do just that. In one example, they can buy up Six Flags bonds at 20.5 cents on the dollar, pay a small premium to get the CDS and then collect the full face value of the bonds when Six Flags files for bankruptcy – which the CDS holder can be sure happens.
Normally, before a company goes into bankruptcy, they would meet with the debt holders to try to re-negotiate their debt. Debt holders will usually do this because they have more to gain from the company remaining in operation than otherwise. Sometimes, the company may even get them to exchange their debt for equity, provided there is a good business model that has the potential for future earnings.
Now, as I’ve described repeatedly, the CDS holders have more to gain from the bankruptcy because they will get their entire investment paid back, with interest, not from the company that issued the debt but from another company that issued the CDS – some company like, for example, AIG!
Speaking of AIG, there was very little coverage of the Senate Committee hearing Thursday (3/5/2009): “American International Group: Examining what went wrong, government intervention, and implications for future regulation.” It was a stunner! Bottom line? Senator Jim Bunning (R-KY) told the panelists that if they asked for another dime for AIG, “You will get the biggest ‘no’” ever heard. The entire committee was incredulous that Federal Reserve Vice Chairman Donald Kohn point-blank refused to tell them 1) who is benefiting from the AIG payouts on CDS and 2) how much more is it going to cost to bailout AIG.
Stand by, because home foreclosures are on the same course as Six Flags: homeowners attempting to re-negotiate their debt will find that somewhere in the background, a CDS holder has more to gain from the foreclosure because they will get their entire investment paid back, with interest, not from the homeowners but from some company that issue CDS – some company like, for example, AIG!
http://www.newgeography.com/content/00641-many-investors-have-more-gain-letting-your-mortgage-or-company-fail
Bill Seeks to Let FDIC Borrow up to $500 Billion
by admin on Mar.09, 2009, under Uncategorized
By DAMIAN PALETTA
MARCH 6, 2009
WASHINGTON — Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department.
The Connecticut Democrat’s effort — which comes in response to urging from FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner — would give the FDIC access to more money to rebuild its fund that insures consumers’ deposits, which have been hard hit by a string of bank failures.
More
* FDIC Letter to Dodd
* Q&A: How Safe is Your Bank Account?
* Graphic: Banks That Went Bust
Discuss
* What’s the best place for your money right now?
Last week, the FDIC proposed raising fees on banks in order to build up its deposit insurance fund, which had just $19 billion at the end of 2008. That idea provoked protests from banks, which said such a burden would worsen their already shaken condition. The Dodd bill, if it becomes law, would represent an alternative source of funding.
Mr. Dodd’s bill could also give the FDIC more firepower to help address “systemic risks” in the economy, potentially creating another source of bailout funds in addition to the $700 billion already appropriated by Congress.
Mr. Bernanke said in a Feb. 2 letter to Mr. Dodd that such a “mechanism would allow the FDIC to respond expeditiously to emergency situations that may involve substantial risk to the financial system.”
The FDIC would be able to borrow as much as $500 billion until the end of 2010 if the FDIC, Fed, Treasury secretary and White House agree such money is warranted. The bill would allow it to borrow $100 billion absent that approval. Currently, its line of credit with the Treasury is $30 billion.
The FDIC’s deposit-insurance fund has fallen precipitously with 25 bank failures in 2008 and 16 so far in 2009. Some bank failures have a bigger impact on the fund than others, as IndyMac’s failure cost the fund more than $10 billion, while many others cost the fund less than $100 million.
A 1991 law generally caps the amount of money the FDIC can borrow from the Treasury at $30 billion, and the FDIC hasn’t borrowed money from the Treasury in more than a decade.
Ms. Bair said a change in the law would give the FDIC more options to determine the best way to rebuild its depleted fund. In an interview, she stressed that all insured deposits were already backed by the “full faith and credit of the United States government.”
A change in the law would ease “the mechanics of how seamlessly we can access our lines of” funding. “I’m the kind of person that likes to be prepared for all contingencies,” she said.
Peter Schiff pulling no punches now - US BANKS are WORTHLESS!
by admin on Mar.03, 2009, under Uncategorized
Government to up Citi stake to 36 percent
by admin on Mar.03, 2009, under Uncategorized
Pittsburgh Business Times
The government will increase its stake in Citigroup Inc. through an exchange that will see an exchange of preferred securities for common stock.
Citi will exchange common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at $3.25 a share. The U.S. government will match this exchange up to $25 billion at the same conversion price.
Should the government exchange the maximum amount, it would up its stake from about 8 percent to about 36 percent.
The move is being made to increase the bank’s tangible common equity.
“While we believe Tier 1 capital remains the most important measure of the financial strength of banks, we recognize that the markets also view Tangible Common Equity as an important measure. This transaction – which requires no additional investment from U.S. taxpayers – does not change Citi’s strategy, operations or governance,” Citigroup Chief Executive Officer Vikram Pandit said in a statement.
The move comes on the same day that Citi said it recorded a pre-tax goodwill impairment charge of $9.6 billion, which increased the bank’s fourth-quarter loss to $27.7 billion, or $5.59 a share.
Obama Meets With British Prime Minister Brown
by admin on Mar.03, 2009, under Uncategorized
CQ Transcripts Wire
Tuesday, March 3, 2009; 1:48 PM
PRESIDENT BARACK OBAMA: Hello, everybody. Good to see you. Where — where are the Brits? (UNKNOWN): They’re over here.
OBAMA: They’re over there, huh?
BRITISH PRIME MINISTER GORDON BROWN: In fact, Barack, they’re everywhere.
OBAMA: Are they? They’re spread out?
All right. My understanding is, we’re going to do four questions. And we’ll just alternate. I’ll start off with Jennifer Loven of A.P.
QUESTION: (OFF-MIKE)
OBAMA: You know, I think that the report that was in the New York Times didn’t accurately characterize the letter. What we had was a very lengthy letter talking about a whole range of issues, from nuclear proliferation to how are we going to deal with a set of common security concerns along the Afghan border and — and terrorism.
And what I said in the letter is the same thing that I’ve said publicly, which is that the missile defense that we have talked about deploying is directed towards not Russia, but Iran. That has always been the concern, that you had potentially a missile from Iran that threatened either the United States or Europe.
And what I said in the letter was that, obviously, to the extent that we are lessening Iran’s commitment to nuclear weapons, then that reduces the pressure for — or the need for a missile defense system. In no way does that in any — does that diminish my commitment to making sure that Poland, the Czech Republic, and other NATO members are fully enjoying the partnership, the alliance, and U.S. support with respect to their security.
So the way it got characterized, I think, was as — as some sort of quid pro quo. It was simply a statement of fact that I’ve made previously, which is, is that the missile defense program, to the extent that it is deployed, is designed to deal with not a Russian threat, but an Iranian threat.
QUESTION: (OFF-MIKE)
OBAMA: Oh, we — well, we’ve had a good exchange between ourselves and the Russians. I’ve said that we need to reset or reboot the relationship there.
Russia needs to understand our unflagging commitment to the independence and security of countries like a Poland or a Czech Republic. On the other hand, we have areas of common concern, and I cited two examples, the issue of nuclear nonproliferation and the issue of terrorism. And at this point, I think we probably have some potential common concerns on the world economic front, as well.
So my hope is, is that we can have a constructive relationship where, based on common respect and mutual interest, we can move forward. BROWN: Nick?
QUESTION: Nick Robertson, BBC News. Mr. President, it’s often been said that you, unlike many of your predecessors, have not looked towards (ph) Europe, let alone Britain. Can you just respond to that comment?
And, also, the prime minister is talking to you about a global New Deal today. Will that actually help hard-pressed American consumers?
And if — if may briefly put a question to the prime minister…
OBAMA: Well, first of all, the special relationship between the United States and Great Britain is one that is not just important to me; it’s important to the American people.
And it is sustained by a common language, a common culture. Our legal system is directly inherited from the English system. Our system of government reflects many of these same values. So — and, by the way, that’s also where my mother’s side of my family came from.
So I think this notion that somehow there is any lessening of that special relationship is misguided. You know, Great Britain is one of our closest, strongest allies. And there is a link, a bond there that will not break. And I think that’s true not only on the economic front, but also on issues of common security.
OBAMA: And, you know, in our conversations here, we talked not only about the need to coordinate around economic policy, but also I expressed to the prime minister America’s extraordinary gratitude for their support in our efforts in Afghanistan and the young men and women of Great Britain, who’ve made enormous sacrifices there.
The — although there — you know, there was a debate obviously around the issue of Iraq, nevertheless, whether you were for or against the war here in the United States, the recognition of Great Britain’s friendship and standing tall with us during that period is something that will never be forgotten. And so rest assured that the relationship is not only special and strong, but will only get stronger as time goes on.
QUESTION: (OFF-MIKE)
BROWN: Let me — let me just thank President Obama for his — for his welcome, for his hospitality, for his leadership of this country, and the inspiration he’s giving the world at this very difficult time.
And I’ve come here to renew our special relationship for new times. It’s a partnership of purpose. It’s a partnership of purpose that is born out of shared values. It’s a partnership of purpose that is founded on a determination to rise to every challenge.
And I think it’s a partnership of purpose that is driven forward now by the need for us all to work together in unity to deal with the world economic problems.
And I’m grateful for the conversations I’m having with President Obama about this and about other things and grateful, too, that Michelle and Sarah will be meeting later this afternoon. And I know they’ll have an enjoyable time, as well.
OBAMA: Absolutely.
QUESTION: (OFF-MIKE) your chancellor has said overnight that it is our collective responsibility (OFF-MIKE) is that a form of apology from the government? Are you apologizing for the problems (OFF-MIKE)
BROWN: Well, there’s got to be big regulatory change. We’ve — we’ve just been talking, Barack and I, about the need for proper supervision of shadow banking systems, of areas where there was bank practices that were unacceptable, where remuneration policies got out of hand and weren’t based on long-term success, but on short-term deals.
And these are the changes that we’ve already announced that we are going to make. So we’ve learned from what has happened over these last 10 years. Things have happened in every part of the world that we’re having to learn about, as well.
And you’ve got an international financial system that we’ve now got to show can be brought to work in the public interest. So every country is learning, and every country is taking action. And what we’re talking about today is how, by us taking action, Britain and America, we can help other countries join us in making for a more stable and effective financial system.
OBAMA: Kara (ph)?
QUESTION: Thank you, Mr. President. The stock market has fallen to lows not seen since 1997 (OFF-MIKE)
OBAMA: Well, let me say this. I’m absolutely confident that they will work, and I’m absolutely confident that credit’s going to be flowing again, that businesses are going to start seeing opportunities for investment, they’re going to start hiring again. People are going to be put back to work.
What I’m looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing.
And, you know, the stock market is sort of like a tracking poll in politics. You know, it bobs up and down day to day. And if you spend all your time worrying about that, then you’re probably going to get the long-term strategy wrong.
Now, having said that, the banking system has been dealt a heavy blow. It has to do with many of the things that Prime Minister Brown alluded to: lax regulation, massive over-leverage, huge systemic risks taken by unregulated institutions, as well as regulated institutions.
And so there are a lot of losses that are working their way through the system. And it’s not surprising that the market is hurting as a consequence. You know, in fact — you know, I think what we’re seeing is that, as people absorb the depths of the problem that existed in the banking system, as well as the international ramifications of it, that, you know, there’s going to be a natural reaction.
OBAMA: On the other hand, what you’re now seeing is — is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you’ve got a long-term perspective on it. I think that consumer confidence, as they see the American Recovery and Reinvestment Act taking root, businesses are starting to see opportunities for investment and potential hiring.
We are going to start creating jobs again. One of the things that Prime Minister Brown and I talked about is, how can we coordinate so that all the G-20 countries, all the major countries around the world, in a coordinated fashion, are stimulating their economies? How can we make sure that there are a common set of principles, in terms how we’re approaching banking, so that problems that exist in emerging markets like Hungary or the Ukraine don’t have these enormous ripple effects that wash back onto our shores? And we’re providing them with some help in a coordinated international fashion, as well.
All of those steps, I think, are going to slowly build confidence, but it’s not going to happen overnight. And — and my main message to the American people is to just recognize that we dug a very deep hole for ourselves. There were a lot of bad decisions that were made. We are cleaning up that mess.
It’s going to be sort of full of fits and starts, in terms of getting the mess cleaned up, but it’s going to get cleaned up. And we are going to recovery, and we are going to emerge more prosperous, more unified, and I think more protected from systemic risk having learned these lessons than we were before.
BROWN: I think President Obama’s absolutely right. And I think the history books will record that what he has done in his first nearly 50 days of office has been momentous in setting the means by which we can see the economic recovery happening.
We’ve had a global banking failure, and it’s happened in every part of the world. It’s almost like a power cup (ph) that went right across the financial system, and we’ve got to rebuild that financial system. We’ve got to isolate the bad assets. We’ve got to underwrite the financial system so that loans can start again to businesses and — and families. And we’ve got to get enough lending into the economy so that people — enough credit so that people are able to go about their normal business again.
And that’s why we’re looking ahead to the G-20 in London in April, because a bad bank anywhere can affect good banks everywhere. So we’ve got to root out the problems that exist in other parts of the world, as well, set principles for the banking system for the future, and make sure that the banks subscribe to lending agreements where they actually increase the lending that is available to — to citizens in every country.
OBAMA: One last one.
QUESTION: (OFF-MIKE) should all governments at this point acknowledge mistakes of policy and regulation (OFF-MIKE) would that be helpful or unhelpful in general? And can I just ask you, an awful lot of ink is used describing the individual relationships between prime ministers and presidents (OFF-MIKE) ask you describe how (OFF-MIKE) working with each other?
OBAMA: Well, I will say that this is my third meeting with — with Prime Minister Brown, and I’d like to think that our relationship is terrific. And I’m sure he won’t dispute me, in front of me, anyway.
The — look, I think that the prime minister has taken the helm of the British economy at a very difficult time. As he noted, I’ve just come in recently. But I think that there are a set of shared values and shared assumptions between us, that we believe in the free market, we believe in a government that is not overbearing and allows entrepreneurs and businesses to thrive, but we also share a common belief that there have to be sufficient regulatory structures in place so that the market doesn’t spin out of control.
OBAMA: I think, on the international front, we have a shared worldview that it is important for us to be true to our values and ideals, of rule of law, of a belief in human rights, a belief in — in our democratic practices, but that we also have to be respectful around the world and to listen and not simply dictate, that, in this new world that we live in, the way to get things done is to build partnerships and alliances as opposed to acting unilaterally.
So I think both on the economy and both — and on foreign policy, we’ve got a shared worldview that allows us to work together very effectively.
And he also has a wonderful family, as I do, so we can always talk about our — our spectacular wives and our wonderful children.
With respect to the first part of your question, look, I think there is no doubt that, setting aside who’s to blame, that in the past there have been some mistakes and lessons learned in terms of how we deal with the financial sector.
Globalization can be an enormous force for good. And one of the things that we’ve talked about repeatedly is that countries in this crisis cannot start turning inward and try to erect protectionist barriers. We should encourage trade.
The fact that we have a global capital system allows money to flow to areas that previously couldn’t get capital. That allows them to develop and to grow. That can grow the economy worldwide, increase trade, and that potentially benefits everybody.
But what is also true is, is that when you’ve got trillions of dollars that can now move at the speed of light, when you’ve got a whole series of unregulated pools of dollars outside of the banking system, but we still have a 1930s’ regulatory system in place in most countries designed from the last great crisis, that we’ve got to update our institutions, our regulatory frameworks, so that the power of globalization is channeled for the benefit of ordinary men and women so that they have jobs, they can purchase a home, they can send their children to college, and prosper and thrive, and — and that the benefits of globalization aren’t just for a small handful of people who are not accountable.
And — and that’s the kind of transformation that we’re, obviously, trying to bring about here in the United States, and I suspect that that’s a view that Gordon shares. BROWN: I’ve enjoyed every conversation that we’ve had, both by the telephone and when we’ve met. I don’t think I could ever compete with you at basketball. Perhaps tennis.
OBAMA: Tennis, I hear you’ve got a game.
BROWN: Yes, we could maybe have a — have a shot.
OBAMA: We haven’t tried it yet.
BROWN: I don’t know. I think you’d be better, but there we are. As far as the common interests that we’re pursuing, look, there is the possibility in the next few months of a global New Deal that will involve all the countries of the world in sorting out and cleaning up the banking system.
And there is the possibility of all the different countries of the world coming together to bring (ph) the expansion in the economy that is necessary to both restore confidence and to give people jobs and growth and prosperity for — for the future.
And there is the possibility of the international institutions for the first time being reformed in such a way that they can do the job that people want them to do and deal with some of the problems that exist in the poorest countries of — of the world.
And there’s a chance, also, that the recovery that we’re talking about can be a green recovery, a low-carbon recovery, where each country in different parts of the world can work on this together.
So the opportunities are there. I’ve said to the president that almost every leader I meet wants the best possible relationship and the most highest degree of cooperation for the future. And so the challenges are momentous and global. The response of leaders around the world is to want to work together.
And I believe that we can make a contribution not just to each of our own economies, but make a contribution to the world economy, helping each economy, if we can actually work together. And that’s why our talk about the G-20 is very important. We hope to make progress on April the 2nd.
And as far as regulation, I — I want the regulatory system to be reformed to meet the needs of our times. When we made changes in 1997, we made changes for the times of 1997. The financial markets have moved global since then, and we need a global means of bringing people together so there’s proper supervision of the system.
You don’t want shadow banking systems. You don’t want regulatory and tax havens. So we’ve got to act as a world together to deal with that. And that’s one of the things we’ll be talking about in April in London.
QUESTION: (OFF-MIKE) Pakistan terror attack (OFF-MIKE) in particular, Mr. President, have made it clear that (OFF-MIKE) see Afghanistan and Pakistan together. How do you think that the world community can support Pakistan?
OBAMA: Well, the details are still coming in, and so I don’t want to be too specific.
(CROSSTALK)
OBAMA: Well, obviously, we’re deeply concerned. But let me just make a general statement.
Both Great Britain and the United States share a deep interest in ensuring that neither Afghanistan nor Pakistan are safe havens for terrorist activity. And we have coordinated effectively in the past, but the truth is, is that the situation in Afghanistan has deteriorated. The safe havens for Al Qaida remain in the frontier regions of Pakistan.
And we are conducting currently a comprehensive review of our policies with respect to Afghanistan, with respect to Pakistan, our coordination with our NATO allies and other members of the international security forces that are there.
I will be making a series of announcements prior to the NATO summit that immediately follows the G-20 summit in terms of the direction that the United States would like to go. What I’m confident in is that our strongest partner in that effort, once again, will be the United Kingdom and — and the prime minister sitting next to me.
OK? Thank you, guys.
QUESTION: Thank you.
END