“This is a plan I am confident will work.” – Treasury Secretary Paulson after G7 meeting.
The stock market staged a late day recovery, on the belief that the meeting of G7 finance ministers would save the world. If the market was expecting details, they would surely be disappointed reading the statement G7 ministers released following their meeting in Washington today.
Treasury Secretary Paulson just finished a press conference which failed to provide any insight regarding the statement’s five point plan of action, other than calling it “aggressive.” Here’s what I consider to be the highlights of Paulson’s press conference:
- Paulson was asked if he had anything to say to “calm the markets.” He replied that there will be “some volatility for awhile." "This is about restoring confidence. There would be a reason not to be confident if the G7 didn’t acknowledge the problem. The press and the markets are naïve if they think that different countries with different financial systems, sizes, structures, and laws will come up with precisely the same policy to deal with the issues.” He said the attitude among participants was “here’s the issues, let’s learn from each other.” Paulson added that the Europeans are interested in the TARP.
- Paulson was asked if any assurances had been made that Goldman Sachs (GS) and Morgan Stanley (MS) wouldn’t suffer the same fate as Lehman Brothers. He said the ministers “did not mention any firms specifically,” but “did speak about firms important systemically.” He said that when he went to Congress requesting additional authorities in July, that authority did not cover investment banks. And there are “no investment banks today.”
- Paulson would not say when Treasury would begin to take action. “People are working around the clock” and it will happen “as soon as we can do it properly.” Paulson made it clear that he had been “encouraging institutions to raise capital for over a year” and “it hasn’t worked as well as we would have liked.”
- On Equity Participation: A “standardized program” is “under development”.
- On Equity Injections: Paulson said that “given the magnitude of the problem, the addition of buying equity is necessary and more effective”; “taxpayer money will go further.” Asked why he was previously skeptical about making direct equity injections into companies, Paulson said he “needed to make sure he got all the tools we needed and continue to focus on how to do the best job for the taxpayer.”
- On Bank Deposit Guarantees: Paulson said deposits guarantees cannot be in sync, as each country has different financial needs and circumstances.