Speeches & Articles

SPECIAL RELEASE

Remarks
Consul General Beth A. Payne

U.S. ECONOMIC POLICY
Bengal Chamber of Commerce and Industry
April 17, 2009

April 17, 2009

Mr. Anup Singh, President,
Ladies and Gentlemen,

Namashkar and Subho Nobo Borsho! 

Thank you for the opportunity to speak to this distinguished audience on U.S. Economic Policy under President Barack Obama.  As you all know, President Obama took office in the midst of the most severe U.S. economic crisis since the Great Depression. This economic crisis recognizes no borders and has become a global crisis that calls for not only a strong U.S. response, but a strong global response.  Today,I would like to review what the U.S. Government sees as the causes of the crisis and to describe actions the U.S. Government is taking, in partnership with our friends throughout the world, to stabilize the U.S. and the world economy. 
 
Recessions are not uncommon.  Markets and economies naturally ebb and flow, as we have seen many times in our history.  But this recession is different.  This recession was not caused by a normal downturn in the business cycle.  It was caused by a perfect storm of irresponsibility and poor decision-making that stretched from Wall Street to Washington to Main Street.  Too many Wall Street executives made imprudent and dangerous decisions, seeking profits with too little regard for risk, too little regulatory scrutiny, and too little accountability.  Banks made loans without concern for whether borrowers could repay them, and some borrowers took advantage of cheap credit to take on debt they could not afford. 
 
This was particularly prevalent in the housing market, where Americans found they could take out loans that by traditional standards their incomes just could not support.  Others were tricked into signing sub prime loans by lenders who were trying to make a quick profit.  The reason these loans were so readily available was that Wall Street saw big profits to be made.  Investment banks would buy and package together these questionable mortgages into securities, and sell or hold the securities, which did not necessarily diversify their risks.

When the housing bubble burst, the value of these risky securitized real estate assets plummeted.  Banks and investors could not find anyone to buy them.  Greed gave way to fear.  Investors pulled their money out of the market.  Large financial institutions that did not have enough money on hand to pay off all their obligations collapsed.  Financial liquidity dried up as banks cut back on lending and even the best of companies found it difficult to access credit or raise capital. 
 
Resulting bankruptcies further weakened confidence in the financial system and the repercussions slowly permeated into other sectors of the economy.  Because the infected securities were being traded worldwide and other nations also had weak regulations, this recession soon became global.  The result has been a devastating loss of trust and confidence in our economy, our financial markets, and our government.
 
However, one of the greatest strengths of the American people is our ability to recognize our mistakes and then take immediate action to correct them.  It will take time to correct these mistakes, perhaps many years, but now that we have identified the causes of this crisis, we are ready to rebuild the lost trust and confidence in the market and government. 
 
Since the outbreak of this crisis in 2008, the U.S. Government has announced a series of measures to shore up our economy.  Since assuming office in January,President Obama and his team have been implementing bold comprehensive actions to restore growth, improve market regulation and strengthen international financial institutions. 
 
These initiatives, which have evolved over time to reflect our improved understanding of the economic system, revolve around the following maxims:

1. without spending and credit there can be no growth,
2. without private trust and public regulation there can be no business,
3. trade liberalization, openness, and market-oriented policies remain the key
   means of promoting global economic growth
4. only with confident, concerted and collective action can we ensure global
   economic recovery.
 
The U.S. Government’s most dramatic effort to jump-start job creation and lay a foundation for economic growth is our new American Recovery and Reinvestment Act.  This initiative is injecting 787 billion USD into the U.S. economy over the next two years, creating or saving about 3 million jobs while investing in priorities like health care, energy, and education that will jumpstart economic growth. 
 
Energy conservation is a major focus of the act.  We hope to double the production of alternative energy in the next three years.  The U.S. Government will modernize more than 75% of our Federal buildings and improve the energy efficiency of two million American homes, saving consumers and taxpayers billions on energy bills and reducing U.S. carbon emissions.  The new technologies developed under these initiatives will not only help the U.S., but will also benefit countries like India that are also searching for affordable alternative forms of clean energy that are essential to fuel future growth.   And, since India is now on the cutting edge of developing new alternative forms of energy, we will be looking to India for ideas and partnerships. 
 
Another focus of this initiative is the modernization of our health care system.  Funds available under the act will ensure that within five years, all of America’s medical records are computerized.  We are investing in the science, research, and technology that will lead to new medical breakthroughs, new discoveries, and entire new industries.  As we develop these new discoveries and technologies, we will build on partnerships with countries like India, where some of the most exciting health research is taking place.  
 
We are ensuring that we have a well educated and therefore competitive work force by equipping tens of thousands of schools, community colleges, and public universities with 21st century classrooms, labs, and libraries.  This will not only ensure that Americans have the benefit of a world class education, but it will retain America’s competitiveness as a preferred destination for foreign students.  With over 90,000 Indians studying in the U.S., Indian students stand to benefit from this initiative.   We also look forward to working with India to develop increased opportunities for U.S. universities to provide quality educational opportunities to Indian students in India, as well as increasing the number of U.S. students studying in India. 
 
Finally, the new law will expand broadband access across America, so that a small business in a rural town can connect and compete with their counterparts anywhere in the world.  Small and medium size businesses are the heart and soul of America’s economy.  Access to ideas and markets through the Internet is essential to ensure they remain healthy and competitive.  This also means that Indian companies will find it easier to identify American products and to access American markets as more and more small American businesses use the Internet to access global markets.

There are some that worry that provisions in the new law, such as the Buy America and visa requirements, indicate a shift towards protectionism as Americans struggle to stabilize our economy.  The Obama Administration has made clear, most recently at the G20 summit, that it rejects protectionism that could deepen this crisis.  We believe that free trade and free competition are good for both the U.S. and Indian economies.  The American Recovery and Reinvestment Act Introduces no new barriers to trade and specifically requires all actions to be consistent with our WTO and other international trade commitments. 

We are always ready to sit down with trading partners such as India, who are not covered by existing agreements or have not signed the procurement protocol of the WTO to discuss access to our procurement markets when they are ready to enter into agreements with specific commitments that provide reciprocal opportunities for U.S. goods, services and suppliers.  The stimulus legislation sends a clear reaffirming signal to our trading partners that access to our Federal and state procurement markets is a matter of coming to the negotiating table, with a willingness to provide a rules-based framework and a balance of similar access to their procurement markets.  Such an approach is not "protectionism" by any definition.

The stimulus law also includes a provision that for the next two years, any companies receiving TARP funding may not hire an H-1B temporary worker unless the company is in compliance with the requirements for an H-1B dependent employer.  It is important to note that this will impact very few Indian H-1B applicants.  A review of the 3,500 companies that received five or more petition approvals shows that only 13 such companies have received bail-out money.  These 13 companies petitioned for only 725 employees, only about one percent of the 65,000 cap on H-1Bs. 
 
It is also important to note that the “H-1B Dependent” condition has been a part of our immigration law for a long time, and employers have been subject to its provisions for many years.  The recent legislation expands the definition of the term to include recipients of this funding.  The rule only affects new employees, not those continuing employment with a company.  Moreover, this provision will sunset in two years.

The American Recovery and Reinvestment Act is only one example of the concrete actions the Obama Administration is taking to stabilize our economy.  The Federal Reserve has also lowered the Federal funds rate target to near zero and substantially expanded its balance sheet to lower the cost and increase the availability of credit in the economy. 
 
The U.S. Treasury Department developed a Financial Stability Plan with detailed programs to address the following key problems at the heart of the current crisis:

1. assessing banks’ need for extra capital in the face of a worsening economy and  providing them with access to capital through the Capital Assistance Program,
2. buying up troubled assets weighing down bank balance sheets through a Public Private Investment Program, allowing banks to raise private capital and increase lending,
3. addressing falling housing prices through a mortgage refinancing and modification program that will help up to 9 million Americans stay in their homes, and
4. unlocking frozen credit markets through a Consumer and Business Lending Initiative to jumpstart new auto, credit card and student loans.

The Obama Administration has also put forward a framework for regulatory reform with new rules of the road to deal with systemic risk, protect consumers and investors, eliminate gaps in our regulatory structure and foster international coordination.
 
The U.S. knows we cannot stabilize the economy without working closely with our international partners, specifically the G20 countries that represent 85% of the world’s economy, to develop a coordinated global response.  At the most recent
April 2 G20 summit in London, world leaders agreed to continue fiscal stimulus measures as needed to promote growth and to address the shortcomings in supervision  and regulation of the banking and shadow banking sectors so that similar crises do not happen again.  
 
They agreed to $1 trillion in additional funding for International Financial Institutions that will triple the International Monetary Fund’s lending capacity and promote lending by multilateral development banks and export credit agencies in order to increase purchasing power, expand markets, and stimulate trade, especially for the developing economies.  The G-20 also pledged again not to take protectionist measures that would reduce trade and further lower economic growth.
 
It is particularly important to the U.S. that the most vulnerable populations around the world - those in the developing world that are not part of the G-20, but who have suffered greatly in this crisis – are helped.  President Obama is currently working with the U.S. Congress to provide 448 million USD in immediate assistance to vulnerable populations and to double U.S. Government support for food security programs to over 1 billion USD.  We believe that these funds are not charity; by supporting the developing world, we are creating future markets for all countries and supporting future drivers of world economic growth. 

In tackling the challenges of this economic crisis, we have a lot to learn from our friends around the world.  For example, India has weathered the economic storm better than most because of its sound banking sector, large domestic market, indigenous economic growth and the economic reforms that have continued, albeit slowly, since the early 1990s.  It has prospered from international trade in goods and services and has attracted foreign direct investment and India’s access to capital and technology as it liberalizes various sectors. 
 
Its companies, especially in the mining, energy, infrastructure, manufacturing and IT sectors are well placed to exploit current market opportunities at home, and abroad.  Indian companies are also exploring opportunities for investing in the U.S. at this time when prices are competitive, and the potential for growth over the medium-term significant as the U.S. economy begins to rebound early next year.
 
Just as democracy is a living, breathing adapting political system, so is capitalism a living, breathing, adapting economic system.  Whereas some may interpret this economic crisis as a time to question the viability of the market economy, the U.S. still believes that a properly regulated market-based democratic system ensures the greatest good for the maximum number of people.  I believe most in India share this view as well.  As we struggle to find the appropriate balance between the free market and proper government oversight, we will ensure that the world’s financial players will no longer be able to make risky bets at the expense of ordinary people. 
 
We will put in place measures that create a new era of responsibility, both in the private sector and in the government.  And, we will remain open to the world as we freely exchange ideas, goods and services.

Thank you very much, and now I’d be more than happy to take a couple of questions.