Remarks of the President Upon Departure to California

THE PRESIDENT: We’re about — I’m about to go to California, but I wanted to make sure that I had a chance to address all of you before we leave. And we’re going to have a town hall meeting there in which we’re going to be answering questions from voters about a whole host of issues.

Obviously, the whole issue of AIG and these bonuses that have been paid out have been consuming a lot of attention — and rightfully so, because they represent what I think all of us consider an inappropriate use of taxpayer funds.

But what I think is also important and just as outrageous is the fact that we find ourselves in a situation where we’re having to clean up after AIG’s mess. And so I just had a meeting with my economic team, but also spoke with Chairman Barney Frank of the Financial Services Committee about the importance of giving ourselves tools to prevent ourselves from getting in a situation where an AIG can pose such enormous vulnerabilities to the system as a whole.

And what we are working on is a resolution authority that would be similar — not identical, but similar to the powers that the FDIC currently has over banks. What they’re able to do is to at the same time protect creditors, depositors and consumers, while also exercising greater power proactively over institutions like AIG — which is not a bank, which is an insurance company with a hedge fund on top of it — would allow us proactively to get out in front, make sure that we are separating out bad assets from good, dealing with contracts that may be inappropriate, and preventing the kinds of systemic risks that we’ve seen taking place with AIG.

So my economic team is going to be consulting with the Hill. We’re going to be moving that on a fast track. This is part of the broader package of financial regulatory steps that we’re going to be taking that ensures that going forward in the future we’re not going to find ourselves in these kinds of terrible positions again.

One last point that I want to make. People are rightly outraged about these particular bonuses. But just as outrageous is the culture that these bonuses are a symptom of, that have existed for far too long — a situation where excess greed, excess compensation, excess risk-taking have all made us vulnerable and left us holding the bag. And one of the messages that I want to send is that as we get out of this crisis, as we work towards getting ourselves out of recession, I hope that Wall Street and the marketplace don’t think that we can return to business as usual. The business models that created a lot of paper wealth but not real wealth in this country and have now resulted in crisis can’t be the model for economic growth going forward.

And I’ve spoken before: We have to move beyond a constant bubble-bust mentality and start establishing a foundation for long-term

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