FROM THE OFFICE OF PUBLIC AFFAIRS

It is wonderful to be here and see so many friends and friendly faces. Thank you for giving me this opportunity to come back.

Indeed, my only purpose today is to say "thank you".

First, to thank you - in the international banking community - for your efforts in tracking down and seizing the terrorists' sources of funding;

Second, to thank everyone in banking and finance for the vital role you are playing in reviving the spark of our economy;

Third, to thank everyone in the international community here for bringing the world to us and helping to keep our minds and our economy open to the rest of the world;

And finally, I want to salute everyone here in the New York area for the courage and the resilience you have shown and for the energy with which you have begun the process of rebuilding and revitalizing this most important of islands in our global economy.

But before I do that, let me digress.

Since I moved to Washington in March, I greatly miss the urban canyons of lower Manhattan and the historic corridors of the New York Fed's fortress on Liberty Street. But with my new duties, I have found a spot where even more of our nation's history comes alive for me.

In the Treasury's black and white marble hallways, I stop as often as I can to marvel at the portrait of Roger B. Taney who served as acting Secretary of Treasury under President Andrew Jackson from 1833 to 1834.

Taney drained the government's deposits from the Second Bank of United States, effectively destroying our nation's central bank. The subsequent vote in Congress over the Bank's charter became a moot point as Taney had already succeeded in his mission.

As his reward, President Jackson appointed Taney to the Supreme Court where he went on in 1857 to the write the Dred Scott opinion, holding that slavery could not be precluded from the territories. Most historians agree that the Dred Scott opinion, as much as anything, set the collision course between north and south that resulted in our civil war.

So, more than anyone else, Roger Taney set us on the path to almost 80 years of periodic banking panics, cycles of deflation and inflation and highly-charged debates about the monetization of silver and gold AND he also set us on the path to the civil war.

You see, one man can make a difference.

This helps remind me that the decisions we make in government can have profound affects on our country and that we should exercise our powers with as much care as we possibly can.

Since September 11^th, I have been almost overwhelmed by your calls asking how you can help us at the Treasury, whether individuals could donate their time and what you can do directly to support our dual efforts to fight terrorism and revive the economy.

My first reaction has been to relive the frustration I experienced last winter filling out the conflict of interest forms, as I have realized how hard - almost impossible - it is for the government to accept the donation of time by talented individuals without subjecting them to an almost absurd level of scrutiny.

My second reaction, however, has been to realize that we at the Treasury are not at the front lines in these efforts, you are. The important question is not how you can help us but, rather, whether we are doing the right things to help you. The cameras and the microphones may point at the podiums in Washington, but you are on the front lines of our most important objectives.

After the terrorist attacks, President Bush asked Secretary O'Neill to lead the global campaign to deny terrorist groups access to the international financial system, to impair their ability to fundraise and to expose, isolate and incapacitate the terrorists' financial resources.
These efforts are unprecedented in their scope and intensity.

The interagency task force responsible for identifying and blocking the terrorists' holdings is chaired by the Treasury and includes the CIA, the Departments of State and Justice, the FBI and the National Security Council.

The Treasury is also working to secure the endorsement of our blocking orders by our G-7 and EU allies and throughout the world. In fact, we reported yesterday that 144 nations are supporting the U.S. effort to combat terrorist financing.

Ken Dam, our Deputy Secretary, John Taylor and Jimmy Gurule, my fellow Under Secretaries, and David Aufhauser, our General Counsel, who are leading these efforts are a talented and dedicated team.

But what has been truly extraordinary has been the number of you that have come forward and volunteered to participate in this campaign to dismantle the terrorist financial network.

Having had some involvement in the legal efforts in the 1980s to manage the blocked Iranian and Libyan assets, I know the reluctance that many of us in the financial world have felt toward these efforts to freeze the dollar assets of those with whom we disagree. It not only felt as if we were looking for a needle in a haystack it also felt as if we were doing nothing other than throwing a few specks of sand in the gigantic gears of international capital flows.

But now we all realize that we face an evil - that we face harms - much, much greater than sand in the gears of capital markets or the challenge of a difficult task. Unchecked, the terrorists' assault on our open society - and on our confidence in each other and ourselves - could do far more profound harm to our way of life and our economy than the burden of tracking and blocking their financial holdings. We all understand that the higher levels of growth, of productivity, of employment and of well being that we are capable of achieving cannot be sustained in the face of the uncertainty caused by acts of barbaric violence.

With your offers of help to search databases, to provide insights into account flows and, ultimately, to close down the terrorists' financial network, this is not a lone search for an obscure needle. It is a broad, cooperative effort of banking organizations and governments from around the world to save lives.

So I want to thank all of you in the international banking community for everything you are doing to carry this effort forward.

I also want to thank everyone here for the roles you are playing in reviving our economy. I am optimistic about the speed with which the economy is going to bounce back because it appears to me that most of you are optimistic or, at least, your bond and swap traders are.

We know that the economy began slowing in the summer of 2000, and was still slow as September 11 approached. But we also have the tremendous benefit of already having significant monetary and fiscal stimulus in place as a consequence of the Federal Reserve's interest rate reductions and the boost to consumer spending from the tax rebates.

The terrorist attacks represent an unprecedented shock to both the demand and supply of goods and services, hitting consumer confidence directly and serving to raise hurdle rates for business investment by heightening uncertainty.

To respond to this, in addition to our immediate emergency efforts for the New York area and Virginia, President Bush asked Secretary O'Neill to lead the Administration's efforts to work with Congress on an economic growth package and we expect the first step to be completed this week with passage of the House version of this bill. Taken all together, with the spending already enacted and the package Secretary O'Neill is now working on, we are likely to see more than $100 billion in spending and tax stimulus coming into the economy this year.

Some of you have expressed concerns about the consequences of this spending for the government's borrowing requirements and its impact on long-term interest rates. If you feel a need to worry, worry about something else.

The federal government's fiscal position is remarkably strong. We have just run four years of surpluses that are the largest in the past 50 years - both in nominal terms and as a share of our GDP.

While we have experienced both a reduction in federal tax receipts and increased spending outflows, every sensible economist knows that we should use our government's financial strength to pursue our national interests in reviving our economy and in defending ourselves against future terrorist attacks. The borrowing requirements that may be needed to finance these dual efforts can easily be absorbed by our capital markets.

In addition, my own reading of the yield curve gives me cause for optimism, not pessimism. Ten-year yields are lower now than they were in August, so we have not seen any back up in long-term rates that might suggest anxiety about our long-run fiscal prospects. The steepness of the yield curve is principally at the short-end, with yields rising sharply over just the first few years. This suggests to me that your bond and swap traders now expect a relatively brief slow down in the economy and I thank you for providing them the capital with which they can express this opinion.

More importantly, everything we do in Washington to revive the economy's growth, through either monetary or fiscal policy, will only be so much arm waving and noise if you, in the banking and financial community, don't carry the effort forward. You - you financial intermediaries - are the front lines in this effort too. It's up to you to provide the advice, the loans and the financing to the sensible business men and women who find opportunities among the risks. They will be the engines of our economy's growth for the next ten years - and of your growth as well.

Our economic recovery will not be secure if we isolate ourselves from the rest of the world or fail to move forward to promote economic growth in all countries.

Expanding global trade is a critical piece of the President's economic recovery plan. President Bush must have Trade Promotion Authority so that we can continue to lead the global effort to increase the flow of goods, services, knowledge and ideas that will create jobs and improve living standards here and around the world.

As Secretary O'Neill has been saying all year: our world is even more interconnected than we realize. The choice between expanding and contracting international trade flows is really no choice at all, as the history of the last century makes plain.

We need your help from the international community to articulate the case - here in this country - for expanding opportunities for all countries. Your presence in our financial community helps us understand how we look to the rest of the world and keeps us engaged and looking outward. Thank you, in the international financial community, for all you do for us and for our economy.

Finally, I want to salute everyone here in the New York area for the courage and resilience you have shown and for the energy with which you have begun the process of revitalizing the economy of this extra-ordinary island and the surrounding communities that have prospered with Manhattan over the centuries.

The Treasury has been supporting our colleagues in the White House who have been working closely with the Mayor's office and the Governor's office to respond quickly to New York's immediate requests. We are now looking beyond the short-term challenges to think through how the federal government can best be an active partner in the longer-term process of rebuilding.

Unfortunately, there is still a great deal that we do not know about the scope and the nature of the financial challenges of rebuilding. And even all the powers and resources of the federal government cannot make us whole, or hold us harmless, or take us back to a time before September 11^th. But by working together, we in the Administration are confident that the city, the state, and the federal government will take the steps necessary to sustain your creativity and your determination to keep New York City the hub of our global economy.

At the close of her novel, Middlemarch, George Eliot observes that "the growing good of the world is partly dependent upon unhistoric acts, and that things are not so ill with you and me as they might have been, is half owing to the number who lived faithfully a hidden life, and rest in unvisited tombs."

The growing good of the world from the tragic events of September 11^th will, no doubt, depend significantly on the heroic acts of those few soldiers and statesmen - and firemen and policemen - who will be honored in their time and in the years to come.

But we also know that the growing good of the world from September 11^th will partly depend upon the unheralded acts of so many - even bankers.

Thank you again for everything you are doing.