Mr. President, financial systems are built on
trust and confidence. They depend on trust and confidence. This
economic crisis was caused in part by a loss of confidence in our
financial institutions, and it was made worse by a loss of faith in
the quality of judgments made by some executives and some boards of
Those failures have caused great damage. You can see this across
our economy and around the world, as workers lose their jobs,
homeowners fight to stay in their homes, families worry about their
retirement savings, and businesses struggle to find the credit
necessary to survive.
Economic recovery will require restoring confidence in the
leadership of these institutions, and in the ability of our financial
system to provide the resources necessary to get our economy back on
The previous administration, working with the Congress, invested
substantial resources in our banks to hold the financial system
together. Those actions were absolutely necessary to prevent much
greater damage than what we have seen today, and we will have to do
more -- substantially more -- to fix this crisis.
Next week, we are going to outline a comprehensive program for
financial recovery. This program will be directed at supporting the
flows of credit that are essential for our economy to begin growing
again, and this program will begin -- will bring substantial reforms
to improve transparency, provide greater accountability and measure
There is a deep sense across the country that those who are not
-- who -- who are not responsible for this crisis are bearing a
greater burden than those who were. So today, I'm pleased to join the
president in announcing a set a reforms to the way companies receiving
taxpayer dollars reward their top executives.
Nothing is more important to me than earning the confidence of
the American people that every policy we embark on is motivated not by
privilege or by private gain, but by the public interest in
strengthening our economy and creating shared prosperity.
The executive compensation policies we are announcing today are
designed to strengthen the public trust that our financial recovery
programs will get credit flowing again and get job creation moving
once more. This will not be easy. It will take time. But the
American people can be confident that this president and his economic
team will bring every ounce of energy and commitment possible to
moving our nation to an economic recovery that is as swift and
widespread as possible.
Thank you, Tim, for your hard work on this
issue and on the economic recovery.
The economic crisis we face is unlike any we've seen in our
lifetime. It's a crisis of falling confidence and rising debt; of
widely distributed risk and narrowly concentrated reward; a crisis
written in the fine print of subprime mortgages, on the ledger lines
of once-mighty financial institutions, and on the pink slips that have
upended lives of so many people across this country, and cost the
economy 2.6 million jobs last year alone.
We know that even if we do everything that we should, this crisis
was years in the making, and it will take more than weeks or months to
turn things around. But make -- make no mistake: A failure to act,
and act now, will turn crisis into a catastrophe; and guarantee a
longer recession, a less robust recovery, and a more uncertain future.
Millions more jobs will be lost. More businesses will be shuttered.
More dreams will be deferred.
And that's why I feel such a sense of urgency about the Economic
Recovery and Reinvestment Plan that is before Congress today. With
it, we can save or create more than 3 million jobs doing things that
will strengthen our country for generations to come. It's not merely
a prescription for short-term spending; it's a strategy for long-term
economic growth in areas like renewable energy and health care and
Now, in the past few days I've heard criticisms of this plan is
somehow wanting, and these criticisms echo the very same failed
economic theories that lead us into this crisis in the first place:
the notion that tax cuts alone will solve all our problems; that we
can ignore fundamental challenges like energy independence and the
high cost of health care; that we can somehow deal with this in a
piecemeal fashion and still expect our economy and our country to
thrive. I reject those theory, and so did the American people when
they went to the polls in November and voted resoundingly for change.
So I urge members of Congress to act without delay. No plan is
perfect and we should work to make it stronger. No one's more
committed to making it stronger than me. But let's not make the
perfect the enemy of the essential. Let's show people all over our
country who are looking for leadership in this difficult time that we
are equal to the task.
At the same time, we know that this recovery and reinvestment
plan is only the first part of what we need to do to restore
prosperity and secure our future. We also need a strong and viable
financial system to keep credit flowing to businesses and families
alike. And my administration will do what it takes to restore our
financial system. Our recovery depends upon it. And so, in the next
week, Secretary Geithner will release a new strategy to get credit
moving again, a strategy that will reflect some of the lessons of past
mistakes while laying the foundation of the future.
But in order to restore trust in our financial system, we've
going to have to do more than just put forward our plans. In order to
restore trust, we've got to make certain that taxpayer funds are not
subsidizing excessive compensation packages on Wall Street.
We all need to take responsibility. And this includes executives
at major financial firms who turned to the American people, hat in
hand, when they were in trouble, even as they paid themselves
customary lavish bonuses. As I said last week, this is the height of
irresponsibility. It's shameful. And that's exactly the kind of
disregard of the costs and consequences of their actions that brought
about this crisis: a culture of narrow self-interest and short-term
gain at the expense of everything else.
This is America. We don't disparage wealth. We don't begrudge
anybody for achieving success. And we certainly believe that success
should be rewarded. But what gets people upset -- and rightfully so
-- are executives being rewarded for failure, especially when those
rewards are subsidized by U.S. taxpayers, many of whom are having a
tough time themselves.
For top executives to award themselves these kinds of
compensation packages in the midst of this economic crisis isn't just
bad taste, it's bad strategy. And I will not tolerate it as
We're going to be demanding some restraint in exchange for
federal aid, so that when firms seek new federal dollars we won't find
them up to the same old tricks.
As part of the reforms we're announcing today, top executives at
firms receiving extraordinary help from U.S. taxpayers will have their
compensation capped at $500,000, a fraction of the salaries that have
been reported recently. And if these executives receive any
additional compensation, it will come in the form of stock that can't
be paid up until taxpayers are paid back for their assistance.
Companies receiving federal aid are going to have to disclose
publicly all the perks and luxuries bestowed upon senior executives,
and provide an explanation to the taxpayers and to shareholders as to
why these expenses are justified. And we're putting a stop to these
kinds of massive severance packages we've all read about with disgust;
we're -- we're taking the air out of golden parachutes.
We're asking these firms to take responsibility, to recognize the
nature of this crisis and their role in it. We believe that what
we've laid out should be viewed as fair and embraced as basic common
And finally, these guidelines we're putting in place are only the
beginning of a long-term effort. We're going to examine the ways in
which the means and manner of executive compensation have contributed
to a reckless culture and a quarter-by-quarter mentality that in turn
helped to wreak havoc in our financial system. We're going to be
taking a look at broader reforms so that executives are compensated
for sound risk management and rewarded for growth measured over years,
not just days or weeks.
We all have to pull together and take our share of
responsibility. That's true here in Washington. That's true on Wall
Street. The American people are carrying a huge burden as a result of
this economic crisis: bearing the brunt of its effects as well as the
costs of extraordinary measures we're taking to address it. The
American people expect and demand that we pursue policies that reflect
the reality of this crisis and that will prevent these kinds of crises
in the future.
Thank you very much.
President Obama, are you worried that banks won't