Remarks at Deutsche Bank
March 4, Bielefeld
Chargé d'Affaires ad interim John M. Koenig
Mr. Buschmann,
Ladies and gentlemen,
It is a pleasure to be in Bielefeld, in Ost Westfalen, an area of Germany I have wanted to get to know better for some time. In Berlin, your reputation is of a region defined by successful Mittelstand firms, beautiful countryside, and friendly people. You are an area of many “hidden champions,” and I am sure many are represented here tonight. Herr Buschmann, thank you again for the invitation to be here with you this evening and for the opportunity to share my thoughts and to hear what is on your minds.
While some of you may be interested in my views on the German-American relationship under the Obama Administration, --the global economic crisis is on everybody’s minds, so I thought I would focus on this instead. I am happy to talk about other issues in the Q& A session. While there are many different views on the origin and cause of the financial and economic crisis, I think we all agree that it requires urgent, decisive action and profound international cooperation -- now.
As businessmen and bankers, you will probably have more insights than I concerning the recent turmoil in the international financial markets. After so many years – even decades -- of almost only positive trends, we have been seeing major declines, something we certainly haven't seen in decades, as major financial institutions in so many countries have faltered. And unfortunately we have also seen the fallout in the so-called real economy, as the market crisis became a credit crisis.
This crisis came about when Wall Street, as well as comparable international financial networks, wrongly presumed markets would continuously rise, and traded in complex financial products without fully evaluating their risks. In the United States, our regulations clearly lagged behind changes in our markets. And so, as President Obama said, and I quote, “We now know from painful experience that we can no longer sustain 21st century markets with 20th century regulations.”
In Washington, the Obama administration has been taking swift action to stabilize, revitalize and expand an American economy that has been weakened and buffeted by this array of conflicting forces. The president’s economic agenda is multi-faceted. The recovery and stimulus plan – the most sweeping economic recovery plan in the history of the United States – is the first step in getting our economy back on track. It is designed to jumpstart job creation, re-start lending, and invest in areas like energy, health care, and education that will grow the economy. There are many numbers in this plan. It will double America’s capacity to generate renewable energy. It will lower the cost of health care by billions and improve its quality. It will modernize thousands of classrooms and send more kids to college. And it will put billions of dollars in immediate tax relief into the pockets of working families. But out of all these numbers, there is one that matters the most. The recovery plan will save or create more than three million new jobs over the next few years to rebuild the transportation, energy and information networks of the 20th century. This investment in 21st century industries will have spinoff in all of our countries. The resulting boost in competitiveness will strengthen world markets and speed recovery.
A crucial element of long-term global economic growth is trade. America is a trading nation, and President Obama understands how critical open markets are to growth. Some have criticized the U.S. stimulus plan, claiming that “buy American” provisions in the legislation create trade barriers. In fact, “buy American” stipulations for public procurement have existed since 1933. They have not prevented the U.S. from being, by far, the world’s largest importer. They certainly have not prevented enormous levels of trade and investment between the U.S. and the Germany, particularly in the last 20 years since the fall of the Berlin Wall.
There will, however, be no real recovery unless we clean up the credit crisis that has severely weakened our financial system. An important companion to any stimulus and recovery initiative is greater accountability.
Last week, President Obama and members of his economic team met with key congressional leaders to discuss the threats to our financial markets in this new century and to develop recommendations for regulatory reform. Legislation will be crafted in the coming weeks and months. The President proposed certain core principles that he believes should shape any proposal for reform. These include:
First, financial institutions that pose serious risks, systemic risks, to our market should be subject to serious oversight by the government.
Second, our regulatory system -- and each of our major markets -- must be strong enough to withstand both system-wide stress and the failure of one or more large institutions. That means modernizing and streamlining our regulatory structure, and monitoring both the scale and scope of risks that institutions can take.
Third, to rebuild trust in our markets, we must redouble our efforts to promote openness, transparency and plain language throughout our financial system.
Fourth, we need strong and uniform supervision of financial products marketed to investors and consumers. And we should base this oversight not on abstract models created by the institutions themselves, but on actual data on how actual people make financial decisions.
Fifth, we must demand strict accountability, starting at the top. Executives who violate the public trust must be held responsible.
Sixth, we must make sure our system of regulations covers appropriate institutions and markets, and is comprehensive and free of gaps, and prevents those being regulated from cherry-picking among competing regulators.
The recovery plan and the financial stability plan are the immediate steps that the Obama administration is taking to revive the American economy in the short-term. The budget that President Obama submitted to the Congress last week is part of his longer-term vision for America. This budget is not simply numbers on a page or laundry lists of programs, it is, as he said, “a blueprint for our future.”
President Obama has pledged to cut the deficit in half by the end of his first term in office. The administration has begun to go line by line through the federal budget in order to eliminate wasteful and ineffective programs. This is a process that will take some time. But already two trillion dollars in savings over the next decade have been identified. That includes education programs that don’t work or direct payments to large agribusinesses that don’t need them. The defense budget will be reformed so that we’re not paying for Cold War-era weapons systems we don’t use. The waste, fraud, and abuse in our Medicare program will be rooted out. A sense of fairness and balance will be restored to the tax code.
In conclusion, it is clear that many of the challenges we face are not just American challenges. They are global challenges. Many of the measures proposed by Finance Minister Steinbrueck are in line with our ideas, and we anticipate much fruitful cooperation with Germany and other partners to restore confidence to the global financial system at the G-20 Summit in London this April, and thereafter.
The work of restoring our economies will not be easy. The necessary reforms will not happen overnight. President Obama is confident that these efforts to rebuild the American economy will succeed. The market has been the engine of America's success -- and I would add transatlantic prosperity. Together we will recover and emerge stronger than before.