Now, what we’ve also learned during this crisis is that our banks aren’t the only institutions affected by these toxic assets that are clogging the financial system. AIG, for example, is not a bank, it’s an insurance company, as I mentioned — and yet because it chose to insure billions of dollars worth of risky assets, essentially creating a hedge fund on top of an insurance company, its failure could threaten the entire financial system and freeze lending even more. And that’s why, as frustrating as it is — and I promise you, nobody is more frustrated than me with AIG — (laughter) — I promise — we had to provide support for AIG, because the entire system, as fragile as it is, could be profoundly endangered if AIG went into a liquidation bankruptcy.
It’s also why we need new legal authority so that we have the power to intervene in such financial institutions, the same way that bankruptcy courts currently do with businesses that hit hard times but don’t pose systemic risks — and that way we can restructure these businesses in an orderly way that doesn’t induce panic in the financial system — and, by the way, will allow us to restructure inappropriate bonus contracts without creating a perception the government can just change compensation rules on a whim.
This is also why we’re moving aggressively to unfreeze markets and jumpstart lending outside the banking system, where more than half of all lending in America actually takes place. To do this, we’ve started a program that will increase guarantees for small business loans and unlock the market for auto loans and student loans. And to stabilize the housing market, we’ve launched a plan that will save up to four million responsible homeowners from foreclosure and help many millions more to refinance their homes.
In a few weeks, we will also reassess the state of Chrysler and General Motors, two companies with an important place in our history and a large footprint in our economy — but two companies that have also fallen on hard times.
Late last year, the companies were given transitional loans by the previous administration to tide them over as they worked to develop viable business plans. Unfortunately, the plans they developed fell short, so we’ve given them some additional time to work these complex issues through. And by the way, we owed that not to the executives whose bad bets contributed to the weakening of their companies, but to the hundreds of thousands of workers whose livelihoods hang in the balance — entire towns, entire communities, entire states are profoundly impacted by what happens in the auto industry.
Now, it is our fervent hope that in the coming weeks, Chrysler will find a viable partner and GM will develop a business plan that will put it on a path to profitability without endless support from American taxpayer. In the meantime, we’re taking steps to spur demand for American cars and provide relief for autoworkers and their communities. And we will continue to reaffirm this nation’s commitment to a 21st-century American auto industry that creates new jobs and builds the fuel-efficient cars and trucks that will carry us toward a clean-energy future.
Finally, to coordinate a global response to this global recession, I went to the meeting of the G20 nations in London the other week. Each nation has undertaken significant stimulus to spur demand. All agreed to pursue tougher regulatory reforms. We also agreed to triple the lending capacity of the International Monetary Fund — which, as many of you know, is an international financial institution supported by all the major economies — so that they can provide direct assistance to developing nations and vulnerable populations. That’s not just charity; because America’s success depends on whether other nations have the ability to buy what we sell, it’s important that we pay attention to these emerging markets.