FROM THE OFFICE OF PUBLIC AFFAIRS
April 19, 2005
JS-2395
Secretary John W. Snow
Prepared Remarks
Mortgage Bankers Association
Washington, DC
Thank you so much for having me here today; I hope you're having a great meeting and are going to have some time to spend on the Hill with your Congressional Representatives. They need to hear from you! You're a very important part of the free-market system that makes this great American economy so strong, and your perspective on financial policy issues is invaluable.
In recent years your industry played a key role in some really terrific economic recovery and growth. Despite today's numbers, the housing market has been strong, with 1.2 million new homes and 6.8 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 – more than ever before.
Well-timed tax cuts, combined with sound monetary policy set by the Federal Reserve Board, got our economy moving when we needed it most. They gave industries like yours the room you needed to grow, and you took over from there. As a result, economic growth was 4.4 percent last year, the strongest in five years. The economy has created 3.1 million new jobs since May 2003.
Manufacturing production is on the upswing, and a revival in
The President has made clear his commitment to strengthen our economy further. This includes reducing the budget deficit – as well as reforming Social Security and the tax system, reducing the regulatory burden on business, and passing energy legislation. We expect the deficit to total 3.5 percent of GDP this fiscal year. Tight controls on discretionary spending and increased revenue as a result of economic expansion are expected to cut the deficit by more than half, to well under two percent of GDP, by fiscal year 2009.
Reducing the tax burden proved to be a successful economic stimulus. Today, high energy prices are acting like a tax on our economy, and relieving that burden is extremely important. The first order of business for Congress in the coming days and weeks needs to be passage of an energy policy that reflects the demands of a new century.
The President has called on Congress to send him a bill that meets four important objectives: First, the energy bill must encourage the use of technology to improve conservation. Second, it must encourage more production at home in environmentally sensitive ways. Third, the bill must diversify our energy supply by developing alternative sources of energy like ethanol or bio-diesel. Promoting safe, clean nuclear power, providing tax credits for renewable power sources such as wind, solar, and landfill gas and continuing our clean coal technology projects are all part of that essential diversification. The bill must also support pollution-free cars and trucks, powered by hydrogen fuel cells instead of gasoline.
Finally, the energy bill must help us find better, more reliable ways to deliver energy to consumers. We must modernize our infrastructure to make
The job of keeping our economy unencumbered is a never-ending one, indeed. From tax cuts to regulations and energy policy, we need to work on it every day, and we need to work on keeping it strong for the future, for the long-term. Reforming our Social Security and tax systems addresses some critical long-term economic issues.
For example, the President's Advisory Panel on Tax Reform is working right now to come up with some options that will encourage growth and save Americans much of the time and headache that they currently spend complying with the tax code. American taxpayers and businesses spend an estimated $130 billion dollars in lost time and money trying to comply with our increasingly unwieldy tax code. That's $130 billion in resources that could be used to create jobs, invest in new business, or spur consumer spending. The $130 billion burden our code places on the American people is a drag on economic growth and an unnecessary headache for Americans.
The President has asked that the fine people on the advisory panel be guided by the goals of increased fairness, simplicity and ease of understanding, and economic growth and job creation. He has also asserted that any reform proposal should carry on the good traditions of recognizing the importance of homeownership and charity in our society.
The panel has held seven meetings so far… two here in
You should also know that the panel recently asked the public to submit proposals for reform. Those proposals are due next Friday, April 29th. Please take a look at their website for more information. The site, http://www.taxreformpanel.gov/, includes instructions on where comments can be mailed or e-mailed. There is also a great new summary of the issues and key themes the panel is considering.
I appreciate the President's leadership on tax reform, and I deeply admire his leadership when it comes to the national discussion on Social Security reform.
Social Security is sound for today's retirees, but the system must be fixed to keep the promise of Social Security for our children and grandchildren. Because of the President's leadership, the national dialogue on Social Security is ubiquitous. Saving and strengthening Social Security is the topic at lunch counters and kitchen tables, college dining halls and office water coolers all over the country.
Ideas are coming forward, and this is an important time to remember that reform of the Social Security system must be lasting, permanent, not just a temporary `band-aid.'
It takes courage to do more than patch up a system that affects every citizen's life. But it's what Americans expect of their leaders; they expect elected officials like the President and the Congress to really solve problems, not just tinker with them.
That's why the President has said that Social Security must be put on solid financial ground permanently, for the long haul. He believes that it would be an injustice to the American people if
So if someone promises you a 75-year fix, I encourage you to read the fine print. In 1983 we were promised a "75-year fix" – but 2 years later, the system was headed out of balance again.
Americans born before 1950 won't be affected by any reform that we achieve, but that doesn't mean they shouldn't be involved in this critical debate. In fact, current and near-retirees have an incredible opportunity: to be the ones to usher in a new generation of shareholders in the American Dream.
President Bush has established some basic principles for Social Security reform, and I'd like to go over them with you quickly today.
He wants a permanent solution, as I mentioned already, not a band-aid.
He wants to preserve benefits for current and near-retirees while saving and strengthening the system for future generations. Specifically, Social Security will not be changed for those 55 or older (born before 1950). For the more than 45 million Americans who are currently receiving Social Security benefits, and those nearing retirement, benefits are secure and will not change in any way, period.
The President has also said that he won't raise the payroll tax rate. Payroll taxes have been raised some 20 times since Social Security was established – and it has failed to make Social Security solvent. Raising the payroll tax will harm our economy, hurt job growth and fail to achieve the President's goal to create a permanent fix for Social Security. As you well know, even the most resilient economy can be devastated by dramatic tax increases.
For future generations of retirees, the President believes an awful lot of hope lies in personal accounts – something that would allow younger workers to build a nest egg that they own and control, something the government could never take away from them, and that would tap into the great force of compound interest – something you, as bankers, understand very well.
Albert Einstein believed, and the President and I agree, that compound interest is one of the most powerful forces in the universe. It's why a personal account nest egg would have a real return on investment that is far better than the rapidly-weakening promise of Social Security benefits.
Former Democratic Congressmen
I know that this audience understands and appreciates what I'm saying here today. You understand the value of ownership, and how sound investments and savings lead to a financially independent future.
You've seen your customers improve the quality of their lives as well as their financial futures through investing in their homes. The goal of owning your own retirement savings speaks to the same benefits as owning your own home, and it's exciting to see a national dialogue on such a promising issue.
It would be impossible to talk about increasing ownership, and homeownership, without discussing the current activity surrounding government-sponsored enterprises (GSEs). Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System (FHLB) play a unique and prominent role in the market in which you all operate, so I want to talk a little bit about the Administration's proposals to strengthen their regulation. We're having an ongoing conversation with the Congress about this matter – I imagine you heard about that from Senator Hagel earlier, and we appreciate his efforts to move reform forward. For now, I'd like to tell you a little bit about what we're asking of Congress.
Our national system of housing finance needs to remain strong and healthy so that it can continue to make mortgage credit available and provide financing opportunities for new homeowners. The Administration's proposed reforms are intended to ensure greater regulatory oversight, enhanced market discipline, and appropriate capital requirements for the GSEs. As we consider these reforms, we are guided by two core objectives: the need for a sound and resilient financial system and increased opportunities for home ownership, especially for less advantaged Americans.
In light of the recent events at the GSEs, the need for meaningful reform has become even more clear. We believe strongly that half-measures will only exacerbate the risks to our financial system.
As we originally outlined in detail in 2003, the regulator for the GSEs should have powers comparable in scope and force to those of other world-class financial supervisors and fully sufficient to carry out the agency's mandate. The regulator must have clear general regulatory, supervisory, and enforcement powers with respect to the GSEs. These powers must include the authority to set both minimum capital standards and risk-based capital standards; the power to assess the entities for independent funding outside of the appropriations process; and the ability to place a failed GSE in receivership.
In order to protect against the systemic risk posed by the housing GSEs' mortgage investment business, the Administration also recommends that limitations be placed on the size of the housing GSEs' retained mortgage investment portfolios. After the appropriate phase-in period, given the overall advances in securitization, the large amount of data available on mortgages, and the increased sophistication of mortgage investors, we believe that our capital markets could adjust to a significant reduction in the presence of the GSEs as mortgage investors.
Our primary goals in developing our GSE reform proposal are to promote the strength and resilience of our housing finance markets, lessen the potential for systemic risk, and continue our progress in meeting the mortgage credit needs of all our Nation's homebuyers. To accomplish those purposes, the fundamental elements of reform that the Administration has proposed are essential.
Thank you so much for having me here today to talk about this set of really historic policy efforts that are underway right now. This is an exciting time to be in government, and I'm extremely proud to be helping the President as we seek to achieve a safe and promising financial future for all Americans.
Thank you again; have a great meeting.
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