Thank you so much for inviting me here today; it's always a pleasure to come to this conference and to work with your group.

I want to talk to you today in large part about the importance of investment for building a strong America.

You are at the forefront of investing in America's communities, businesses and families. You're doing great work. Loans for home and commercial mortgages literally build economic opportunity. You also deal in other forms of investment, like investing in financial education. You invest time and resources to work in partnership with the government to fight the financial war on terror, and that investment helps keep our financial system safe.

I deeply appreciate what you do. In recent years your industry played a key role in some really terrific economic recovery and growth. While showing recent signs of easing from record growth rates, the housing market remains strong, with more than 1.2 million new homes and 7 million existing homes sold over the past year alone. 

You should be very proud of your success for two important reasons: first, housing market activity is an important part of economic strength and growth, which has led to steady job creation; and second that nearly 70 percent of Americans today own their own homes.

The country is moving in the right direction now, economically, and you're part of that success. With 5.2 million new jobs created in the past three years and unemployment at a very low rate of 4.7 percent– that's lower than the average for the 1960s, 1970s, 1980s or 1990s – there is much for you and your customers to be proud of and optimistic about.

There are some headwinds to the economy. Gasoline prices are one area where Americans could use some help.  The President has presented a four-part plan that includes making sure consumers and taxpayers are treated fairly, promoting greater fuel efficiency, boosting our oil and gasoline supplies, and investing aggressively in alternatives to gasoline, so we can eliminate the root cause of high gas prices by diversifying away from oil in the longer term.

The first part of that four-part plan, fair treatment, has a tax component that I want to touch on. The President called on Congress yesterday to repeal certain tax breaks that are unnecessary for energy companies, and I think that's important. With oil prices at record levels, energy companies have large cash flows – and they should reinvest their profits into expanding refining capacity, researching alternative energy sources, developing new technologies, and expanding production. Record oil prices and large cash flows also mean that energy companies do not need unnecessary tax breaks like the "geological and geophysical expenditure" depreciation acceleration provision in the Energy Policy Act of 2005.  This unnecessary tax break allows energy companies to rapidly depreciate costs related to oil exploration.  The President has also called on Congress to repeal the Energy Policy Act provision subsidizing energy companies' research into deepwater drilling.  The President is looking forward to Congress taking about $2 billion of these tax breaks out of the budget over a 10-year period of time.

The President appreciates that high gas prices act like a tax on families and businesses, and his plan seeks to ease the pain to the extent it is possible. But the good news is that our strong economy can handle some headwinds at this point. We really are firing on all cylinders when you look at GDP growth, job creation, consumer confidence and a host of other indicators.

Looking back, there can be no question today that well-timed tax relief, combined with responsible leadership from the Federal Reserve Board, created an environment in which small businesses, entrepreneurs, and workers could bring our economy to this point of strength.

Importantly, tax relief encouraged investment, which has ultimately led to job growth. The American economy is now unmistakably in a trend of expansion, and those trend lines can clearly be traced to the enactment of pro-growth tax relief.

In the past two years, the economy has generated more than 170,000 jobs per month, and that includes the two-month slowdown in job growth in the aftermath of Hurricanes Katrina and Rita. In the first quarter of this year, new claims for unemployment insurance were lower than almost any time in the past three decades, the only exceptions being the peaks of the booms in the 1980s and 1990s. 

Good, steady job growth is no surprise, given that GDP growth was three and a half percent last year, and signs point to very strong growth continuing this year.

The American economy proves to be on solid footing. The question that those of us in government must look at now is this: what can we do to continue these positive trends?

The answers as I see them: First, keep taxes lower on both investment and incomes. The conference committee on tax relief reconciliation is considering this matter now and I have been strongly urging them to keep tax rates low, and to act on extending the President's tax relief as soon as possible. We must protect and nurture our economic growth – not put it in jeopardy with tax increases.

I know that, in your business, you see the economic benefits of investment every day. Money for business expansion or development improves the communities where it's invested. So I'm sure it's no surprise to people in this room that since the implementation of a lower, 15 percent rate on investment capital in May of 2003 we have seen a remarkable turn-around in the economy. After nine consecutive declining quarters of real annual business investment, we have had 11 straight quarters of rising business investment. This business expansion led to a substantial increase in employment, as I just mentioned – 5.2 million new jobs. There can be no question that we need to keep the tax rate on capital gains and dividends where it is; a tax increase would be a terrible mistake. While many factors contributed to the improved performance of the economy, the tax reductions on capital have been at the heart of the progress we have seen.

Prior to Congress' Easter recess, much progress was made on completing a tax bill that will extend for two years the investment tax cuts originally enacted in 2003. While worrisome that this bill has been pending for over a year, it is heartening that it is so close to completion. As I said before, we cannot afford to wait any longer. The time for Congress to finish this business is now. Investors, risk-takers, job-creators, and wealth builders make their decisions by placing bets on the future - and any further delays will give the impression that tax rates on the rewards from their risks are going up - and will cause immediate damage to the lifeblood of the economy.

Why has the continuation of an unambiguous policy success taken so long? And I don't use the phrase "unambiguous success" lightly - rarely in public policy do you see a vindication of those pushing a positive change to the status quo, and a refutation of the dire predictions of its opponents. The President and I always believed, and said, that eliminating the double tax on dividend income would help spur investment, economic growth and job creation. Our opponents said the tax cuts were a "reckless plan…that does not create jobs" or that it was "not a growth package."

Vindication really is the only word to describe the good news that continues to pour in. With the enactment of the Jobs and Growth Act of 2003, the U.S. economy made a remarkable turn-around, and month after month of strong economic indicators – all of the charts have lines that go up – are the proof of good policy.

All of which returns me to my original question: Why has continuation of the lower rates taken so long to pass? I can only surmise what motivates those who want to raise taxes. Perhaps they do not believe the results that we all see. Perhaps they cling to their theory even though it does not appear to work in practice. Their theory appears to be that economic growth is the result of low interest rates, which are the result of government budget surpluses, which are the result of higher tax rates. But this puts the cart before the horse - it is an economic perpetual motion machine, with one result - higher taxes and a government that grows faster than the private sector. They do not understand that growth (and low real interest rates) is the result of low tax rates (especially on risk-taking), light regulation, and sound monetary policy.

There is certainly more long-term work to be done – making these tax cuts permanent, not mere extensions; further enabling individuals to own their health care solutions through Health Savings Account expansion; and taking additional steps to simply the tax code, which we at the Treasury Department are currently studying. Once Congress passes and the President signs these tax cut extensions, the tax code improvements achieved by the Bush Administration and the Republican Congress over the past 5 plus years will be extensive: Lower income tax rates for all taxpayers, lower taxes for investors and small businesses, tax cuts for families rearing children, a lower (and hopefully repealed) death tax, and Health Savings Accounts.

But for the short term, the private sector can't wait any longer for future plans – the tax cut extensions must be enacted – the time is now. This is the most important economic message I can deliver to you, and to the Congress, on this day.

There are other issues impacting your industry that both you and I are talking to Congress about, of course. One of those is regulatory reform of GSE's. You know where we stand on this, I think. The Administration continues to support meaningful GSE reform, particularly reduction of portfolios to address potential systemic risk concerns.

We liked the bill that passed the Senate Banking Committee last summer, which would create a new regulator for the housing GSEs with powers and authorities like that of other world-class financial institutions' regulators. I look forward to working with your industry and with Congress to find the right path for the future for GSE regulation.

Changing times bring new challenges, and we face, together, the very modern challenge of data security. Technology has made banking wonderfully fast and efficient, but it has also brought new security threats. As we at the Treasury consider the issue of data security, we must ensure that we do two things: 1) we must take all reasonable efforts to ensure that Americans are not made unnecessarily vulnerable to identity theft and related frauds, and 2) we must ensure that any potential steps required by government do not inhibit the inventiveness that is so vital to our free enterprise system.  In many ways, President Reagan expressed this best, when he stated that "Government's first duty is to protect the people, not run their lives."

As we work together on these and other issues that will keep America economically strong and resilient, I want to thank you for all that the nation's mortgage banks do investing in America. I thank you for the work you do, and the chance to speak to you today. I'd be happy to take your questions now.