Remarks by Treasury Secretary Tim Geithner at NanoMech Manufacturing Plant and Labs

Remarks by Treasury Secretary Tim Geithner at NanoMech Manufacturing Plant and Labs

Springdale, AR

As Prepared for Delivery

Thanks to Jim Phillips and Dr. Ajay Malshe. I admire what you have built.

And thanks to Congressman Steve Womack for welcoming me to Arkansas. A quick note about Steve. I had a chance to testify the other day before one of his Committees. And he was tough, but smart and civil and fair, and he was focused not on the politics of the moment, but on what works and what doesn't.

It is excellent to be out of Washington.

I had a chance this morning to meet with a group of business leaders from your community, and then to take a look at what NanoMech is creating and building here in America.

Why this state, this community, this company?

Across the United States, not just in Silicon Valley or the Research Triangle, despite the damage caused by this crisis, despite all the challenges we have as a nation, and despite stronger competition from around the world, American companies are designing and building the products of the future, demonstrating the fundamental dynamism and resilience of the American economy.

This community and this company can help Americans understand our strengths, help Americans appreciate what it is going to take to win the future, and help Americans be confident that we can meet that challenge.

Our most important economic policy challenge is to make sure that the United States of America is the best place on the planet to do business, the best place in the world to do what Dr. Ajay Malshe did—to transform an idea into a company, a company that provides the chance for an American family to earn a decent living, put their children through college, save for retirement.

To help make this possible, we need Washington to do a lot of things better.

We need a skilled, highly educated workforce.

We need to support cutting edge research and technology.

We need a fast and reliable transportation and communications network.

Innovate, educate, invest – these are the foundations of the American economic strategy.

And they require investments and reform in Washington.

Investments in education, innovation and infrastructure.

A financial system that will provide the capital and funding businesses need to grow.

Reforms to cut spending and deficits so that we can afford those investments.

A centerpiece of this strategy is to create stronger incentives for investment and innovation in the United States.

The President has proposed a permanent and more powerful tax credit for research and development. And we released a report today on the economic benefits of this kind of incentive in helping support more than $100 billion dollars in innovative research and nearly 1 million research workers in professions that pay a good salary. And most of these benefits will go to manufacturing companies.

This proposal should be part of a comprehensive reform of the corporate tax system to make American companies more competitive. Reform that eliminates loopholes and preferences, lowers the tax rate on investments in the United States, and replaces a complicated muck of temporary provisions, with a more powerful, but more targeted set of permanent incentives, like the R&E tax credit.

These incentives can help companies like NanoMech innovate and expand.

We have a lot of challenges ahead of us. Millions and millions of Americans are still looking for work, at risk of losing their homes, less confident about their future, struggling to provide for their families in the face of higher gas prices. And the rest of the world is getting better at things that had defined America's strengths.

But we are a very strong country, and we are getting stronger again.

As we dig out of this crisis and fix our budget deficits so that we are living within our means, we need to make sure we keep working to strengthen our ability to grow. We need to bring a relentless focus to making this country the best place on earth to create and build things, to start a company, to raise a family and educate your children, and to invest in the future.

This is the President's economic strategy. This is our responsibility. And I hope we can find a way to get Washington to work together to make that happen.​

---

Questions? Contact Us

Treasury Department Statement on AIG's Transaction Agreement

Treasury Department Statement on AIG's Transaction Agreement

WASHINGTON – The US Department of the Treasury today issued the following statement from Acting Assistant Secretary for Financial Stability Tim Massad upon the announcement that American International Group Inc. (AIG) has entered into a transaction agreement with the US Department of the Treasury, the Federal Reserve Bank of New York, and the trustees of the AIG Credit Facility Trust to accelerate the repayment of U.S. taxpayer funds. This development is the next step in a process that will accelerate the government's exit from AIG and ensure that we recover our investment. When this transaction closes, which will occur no later than March 15, 2011, the Federal Reserve loan will be paid off with no expected losses and Treasury's preferred stock investment will be converted to common shares. Treasury can then sell those shares publicly in order to recover taxpayer funds over time.

"Today's announcement is a milestone in the government's long-stated efforts to exit our investments in private companies as soon as practical while protecting taxpayers," said Massad. "When all is said and done, we believe taxpayers will recover every dollar invested in AIG and stand a good chance of making a profit."

For additional background:

Treasury Update on AIG Investment Valuation, November 1, 2010: http://www.financialstability.gov/latest/pr_11012010.html

Treasury Releases Two-Year Retrospective Report on the Troubled Asset Relief Program,
October 5, 2010: http://www.financialstability.gov/latest/pr_10052010.html

Statement by the US Treasury Department on AIG Exit Plan, September 30, 2010: http://www.financialstability.gov/latest/pr_09302010.html

Treasury Names Two Appointees to AIG's Board of Directors, April 1, 2010: http://www.financialstability.gov/latest/tg_04012010.html

U.S. Treasury and Federal Reserve Board Announce Participation in AIG Restructuring Plan, March 2, 2009: http://www.financialstability.gov/latest/tg44.html ​

---

Questions? Contact Us

Treasury Announces Pricing of Citigroup Common Stock Offering

Treasury Announces Pricing of Citigroup Common Stock Offering

Treasury Exits Citigroup Common Stock Position Netting a CUMULATIVE PROFIT FOR TAXPAYERS OF $12.0 BILLION

Washington – The U.S. Department of the Treasury announced today that it priced an underwritten public offering of approximately 2.4 billion shares of Citigroup Inc. common stock at $4.35 per share. This offering disposed of Treasury’s remaining shares of Citigroup common stock. The aggregate proceeds to Treasury from the offering are expected to be $10.5 billion. The total amount of Troubled Asset Relief Program (TARP) funds returned to taxpayers now exceeds approximately $261 billion.

"By selling all the remaining Citigroup shares today, we had an opportunity to lock in substantial profits for the taxpayer and avoid future risk. With this transaction, we have advanced our goals of recovering TARP funds, protecting the taxpayer, and getting the government out of the business of owning stakes in private companies,” said Tim Massad, Acting Assistant Secretary for Financial Stability.

Treasury received approximately 7.7 billion shares of Citigroup common stock at a price of $3.25 per common share from the exchange offers in July 2009 in exchange for the $25 billion in preferred stock received in connection with Citigroup’s participation in the Capital Purchase Program. The exchange was part of exchange offers conducted by Citigroup to strengthen its capital base. Treasury had disposed of approximately 5.3 billion shares to date in at-the-market sales with an average price of $4.05. Following the completion of the offering at $4.35 per share, Treasury’s average selling price for the entire 7.7 billion shares is $4.14.

Treasury invested a total of $45 billion in Citigroup pursuant to the TARP (and made a $5 billion commitment under the Asset Guarantee Program that was never funded). With this offering, Treasury has recovered all of the $45 billion plus approximately $12.0 billion in profits consisting of, dividends, interest and gain on the sale of Citigroup common stock and other securities.

Citigroup Investment Summary ($ in billions)
Underwritten Offering of Common Shares (12/6/10)	$10.5
Completed Common Stock Trading Plans as of 12/6/10	21.3
TruPS Repayment (10/5/10)1	2.2
Targeted Investment Program Repayment (12/9/09)	20.0
Interest and Dividends	2.9
Total Proceeds	$57.0
Total Investment	$45.0
Realized Gross Profit2	$12.0
1. The entirety of Treasury's proceeds from this sale represents a profit to taxpayers, because Treasury did not incur any losses on the $5bn in Citigroup assets it guaranteed in exchange for these TruPS®.
2. Excludes warrants from the CPP, TIP, and AGP investments and TruPS with an $800mm principal value held by the FDIC for Treasury's benefit.

In addition, the taxpayer will ultimately receive proceeds from the sale of the warrants for Citigroup common stock received under TARP as well as the sale of up to $800 million in TruPS® held by the Federal Deposit Insurance Corporation for Treasury’s benefit.

The offering is expected to close on or about December 10, 2010. Morgan Stanley acted as bookrunning manager. The underwriting fees for this transaction will be paid by Citigroup.

The results of this underwritten offering will be posted on Treasury’s TARP transaction report within two business days of its completion at www.financialstability.gov.

Copies of the prospectus supplement and accompanying prospectus relating to the offering may be obtained from Morgan Stanley & Co. Incorporated, Attn: Prospectus Department, 180 Varick Street, New York, NY 10014, by emailing prospectus@morganstanley.com or by calling toll-free in the United States 1-866-718-1649.

---

Questions? Contact Us

The Treasury Department Does Not Want You To Know Anything

Daily Treasury Guidance for Tuesday, December 7, 2010

On Tuesday, Secretary Geithner will attend the President’s Economic Daily Briefing at the White House. This meeting is closed press.

In the afternoon, Secretary Geithner will lead a town hall discussion with employees from the Treasury Department’s Office of Financial Stability. This event is closed press.

In the evening, the Secretary will host business leaders at Treasury for a discussion of the state of the economy, employment trends, and the Administration’s priorities for supporting the competitiveness of American businesses. This meeting is closed press.

The Futures Are Up!

And what are they up on? The tax cut compromise, that's what they're up on!

"What compromise?" you ask. Well, let me tell you...

At 6:32 PM last night, President Obama announced the details of the compromise between the Democrats and the Republicans on the subject of whether or not the Bush tax cuts will expire. As a reminder, the Democrats wanted to extend the tax cuts for anyone making less than $200,000 (about 96.9% of the populace, according to my calculations from IRS figures[1]) while the Republicans wanted to extend the tax cuts for everyone (about 100% of the populace, according to IRS figures).

How did the compromise work out? In the words of the President, "we have arrived at a framework for a bipartisan agreement. For the next two years, every American family will keep their tax cuts -- not just the Bush tax cuts, but those that have been put in place over the last couple of years that are helping parents and students and other folks manage their bills.... Now, under this agreement, unemployment insurance will also be extended for another 13 months, which will be welcome relief for 2 million Americans who are facing the prospect of having this lifeline yanked away from them right in the middle of the holiday season."

In other words, the compromise boils down to "the Republicans get everything they want, and the Democrats give it to them." An interesting definition of compromise, don't you think?

But surely that's not it? What else is driving futures?

Well, Reuters is reporting that China's central bank is getting ready to tighten the yuan by raising interest rates. Their CPI has hit a 27-month record high of 4.7% and this, combined with fears driven by US market concerns about the Fed possibly buying more than $600 billion in Treasuries, has China concerned about inflation. Rising interest rates are the universally-accepted cure for inflation, so get ready. Asian markets were down initially on the news, but recovered somewhat (mostly because the markets have already priced in more tightening).

And, of course, there's the Treasury announcing an underwritten public offering of it's remaining 2.4 billion shares of Citigroup common stock, at $4.35 per share. Once these are sold, that will eliminate the Treasury's full position of Citigroup common stock, although it will continue to hold warrants for more common stock as well as $800 million in TruPS[2].

[1] The President puts it at 98% in his speech, but what's 1.1% between friends?
[2] TruPS? Investopedia (http://www.investopedia.com/terms/t/trustpreferredsecurity.asp) defines them as "trust preferred securities), securities similar to debentures and preferreds that are generally longer term, have early redemption features, make quarterly fixed interest payments, and mature at face value. They also maintain the appearance of equities in a company's accounting statements, which sounds to me like an accounting trick to make the company look like it has less liabilities than it really does, but it is in accordance with GAAP. So it's legal.

Statement by the President on Tax Cuts and Unemployment Benefits (http://www.whitehouse.gov/the-press-office/2010/12/06/statement-president-tax-cuts-and-unemployment-benefits)
China rate rise talk builds as loans and inflation rise (http://www.reuters.com/article/idUSTRE6B60XG20101207)
Treasury Announces Public Offering of Citigroup Common Stock (http://www.treasury.gov/press-center/press-releases/Pages/TG994.aspx)

Your Word For The Day: Grotty

First off, the euro is up and PIIGS bond yields are down on rumors. The rumors start with a report from "G20 sources" that deputy finance ministers from the G20 nations had discussed the terrible European situation in a conference call on Monday. This, combined with the US Treasury announcing it would send someone to Europe to discuss the EU's pending economic collapse with governments in Berlin, Madrid and Paris[1], has naturally (obviously) led to the conclusion that the European Central Bank will calm the situation by massively increasing their purchases of European sovereign debt.

Jim Cramer, in his lucid days, said that "tips are for waiters". Keep that in mind, until the ECB actually says it will do something.

The European rumors and good factory data out of China (specifically, their Purchasing Managers' Index hit a 7-month high of 55.2) seem to be driving the futures up. There are a few bits of domestic news that could hinder the joyous rumor-driven market frenzy, however.

First off, the Fed is going to have to release details about the emergency loans they handed out during the 2007-2009 market collapse. You remember those, right? The massive bailouts of AIG, and Goldman Sachs, and Morgan Stanley, and Merrill Lynch, and Lehman Brothers...

Oh, wait. That's right. They didn't bail out Lehman Bros. The people who are really excited about the release of the data are curious to see why they didn't get bailed out. Also, most analysts are expecting the data to be disclosed in a less-than-helpful fashion. Or, as Christopher Whalen (managing director at Institutional Risk Analytics) puts it: "My sense is they're going to give us the disclosure in the same grotty fashion (as before). It's not going to be well organized so you'll have to sort through it."[2]

Imagine that. The Fed might not want people to figure out what they're doing. Shocking. Shocking, I say.

Second, Challenger, Gray & Christmas, Inc. has released a report that employers announced 48,711 job cuts in November, up 28% from the 37,986 job cuts in October. In what passes for good news, this is still down 3.3% from the job cuts announced a year ago in November. But hey, they're being offset by plans to add 15,900 seasonal employees in the retail sector and 500 in the transportation sector last month. {3]

[1] Because the US is obviously in a position to explain to other nations how to bring their economic problems under control, and to explain how to implement austerity measures.
[2] Grotty. Adjective. seedy, wretched, dirty
[3] Because temporary seasonal jobs obviously offset the loss of full time permanent jobs. Obviously.

Articles cited:
ECB talk lifts battered euro as crisis worries spread (http://www.reuters.com/article/idUSLDE6AO0HG20101201)
Futures rally on euro bounce, strong Chinese data (http://www.reuters.com/article/idUSTRE69O1D320101201)
Time for Fed to show who crisis loaned benefited (http://www.reuters.com/article/idUSTRE6B014S20101201)
48,711 November Job Cuts UP 28% From October (http://www.challengergray.com/press/PressRelease.aspx?PressUid=151)
Short on votes, deficit panel delays decision (http://www.reuters.com/article/idUSTRE6AS4Z120101201)