FROM THE OFFICE OF PUBLIC AFFAIRS

The United States and Ireland have many interests and challenges in common.

Today, I will discuss the common interest we share in a strong financial services sector – both in our home markets and in foreign markets.

I will also discuss the common challenge we face in ensuring that our financial systems are not abused by terrorists to finance attacks against our people and our economies.

Of course, the United States and Ireland both have very strong financial service sectors.

Our strong financial service sectors have been important to our prosperity. They direct capital to its most valued use and fuel the innovation that increases productivity and leads to growth.

Our financial services also help to stabilize our economies from volatility, whether in the form of external shocks such as the terrorist attacks of September 11 or in the form of economic volatility more generally. As Federal Reserve Chairman Alan Greenspan put it, "New financial products – including derivatives, asset-backed securities, collateralized loan obligations, and collateralized mortgage obligations, among others -- have enabled risk to be dispersed more effectively to those willing to, and presumably capable of, bearing it. Shocks to the overall economic system are accordingly less likely to create cascading credit failure."

Sophisticated financial services have also helped sustain the recovery in the United States, despite volatility in equity markets. As interest rates fell over the past year, American homeowners took advantage of very efficient and competitive primary and secondary mortgage markets to refinance their homes.

In many cases, homeowners extracted equity from their homes and spent it on household goods or invested it in improving their homes. Now that the ten-year Treasury rate has fallen below 4%, we may be seeing a continuation of this trend. Also, the low rates and our ability to securitize automobile loans have allowed automobile manufactures to offer innovative financing to customers and helped sustain demand in that sector.

At Treasury, we believe that just as financial services play important roles in the U.S. and Irish economies, financial services play important roles in developing economies. For that reason, the Bush Administration launched a major initiative to open developing country financial markets to investment by foreign financial services companies. These investments, we believe, can help speed the worldwide development of robust financial services sectors as countries such as the United States and Ireland export their best practices in financial services to developing economies.

Our common interest, therefore, is in working with developing economies to increase the openness of their financial services sector to foreign direct investment and to improve the supervision and regulation of the financial sectors in developing economies.

I would like to turn now to a common challenge – ensuring that the world’s financial systems are not abused by terrorists.

On September 11, after the first plane hit, we were discussing whether the New York Stock Exchange should close. Then the second plane hit. Then we felt a thump as the third plane hit the Pentagon. Shortly thereafter, we evacuated the Treasury – there were still planes in the air and our Treasury bureau, the Secret Service, believed that the White House was a target.

As the attacks occurred, we knew two things: (1) the terrorists struck deliberately at our financial system and our economy, as well as our people; and (2) that it took money to plan, prepare, and execute the attacks. Since September 11, we have worked hard in the United States and abroad, with the help of other governments, to disrupt terrorist financing.

Since September 11, $112 million around the world has been frozen. Over 160 countries have blocking orders in force. More importantly, we have cut the flow of terrorist money. For example, we have designated a network of money transfer agents known as Al-Barakaat, which was channeling as much as $15 to $20 million to al Qaida a year.

Further, countries around the world are improving their financial regulations to disrupt terrorist financing. To cite just one of many examples, according to the Foreign Broadcast Information Service, Thailand recently announced plans "to reduce the minimum value of transactions subject to scrutiny" by its anti-money laundering office.

As these safeguards increase and as we remain vigilant in ensuring that terrorists do not use our financial system to move and store money, terrorists must resort to other means – such as physically carrying currency in bulk – that are expensive, time consuming, uncertain, and expose them to greater risk of capture. For example, Customs, United States Secret Service, and FBI agents recently apprehended and subsequently indicted Jordanian-born Omar Shishani in Detroit for smuggling $12 million in forged cashier’s checks into the United States.

I should note specifically that Ireland has been an important ally in the war against terrorist financing. Ireland fully supports U.S. efforts to fight terrorist financing, although Irish authorities have no domestic authority to freeze the assets of terrorist and rely on the EU to freeze the assets of U.S. and UN designated terrorists and their supporters. Pending legislation would give Irish authorities the power to designate and freeze the assets of terrorists without EU action.

It is, of course, important for Ireland to act in concert with the European Union in blocking terrorist assets. But it is also important that EU member countries have the independent legal means to act in case the EU process -- which requires unanimity -- leads to delays or even vetoes. After all, the obvious danger is that the terrorists will simply move the funds during the pendency of lengthy EU proceedings.

In sum, we are making some progress. We believe that al Qaida and other terrorist organizations are suffering financially as a result of our actions. We also believe that potential donors are being more cautious about giving money to organizations where they fear that the money might wind up in the hands of terrorists.

At the same time, we have much to do. Although we believe we have had a considerable impact on al Qaida’s finances, we also believe that al Qaida’s financial needs are greatly reduced. They no longer bear the expenses of supporting the Taliban government or of running training camps, for example. We have no reason to believe that al Qaida does not have the financing it needs to conduct at least a substantial number of additional attacks. In short, a great deal remains to be done. This is particularly true in the area of safeguarding charities from abuse by terrorists and preventing terrorists from abusing hawala networks. (Hawalas, by the way, are a centuries old way of moving money based on trust that generates little paper trail.)

We know that we can count on the support of the financial services community in both the United States and Ireland as together we address this common challenge.