We think it is unlikely that the Treasury will lose money on this program, and it sits ahead of the Fed in terms of its loss exposure. The risk posed to the Federal Reserve therefore seems quite remote. Instead, we expect that the program will be profitable for the taxpayers and will be successful in pushing down yields and increasing credit availability. Turning from the issues of design and risk to issues concerning implementation and effectiveness, we have been rolling the TALF out in stages – first the consumer ABS market, with the first subscriptions for TALF loans in March; second, new CMBS securitizations that will start in early summer; and third, legacy CMBS and, possibly legacy RMBS, later this summer. By legacy assets, we mean highly-rated existing securitized assets that are already outstanding. The legacy TALF program will help support asset-backed-securities prices. This should help aid market liquidity and make financial firms that hold such assets less vulnerable to the risk of further losses. So far, the evidence indicates that the program is working as designed. First, the issuance of consumer ABS securities has been gradually reviving. In March, four deals came to market worth $ billion. In April, there were another 4 deals worth $ billion. In May, there were 8 deals worth $ billion and this week, there were 13 deals worth $ billion. We’re not back yet to the $ billion annual rate of issuance before the crisis and we don’t expect to get there, but we are making a good start.
Given what we have experienced in the last two years, it is my hope that the international community will see the wisdom of not waiting for the next crisis to learn how we can make the international financial system a more robust and safe one for all of us.” 3. Ladies and Gentlemen, I made the above remarks over 10 years ago, in June 1999. It was ten months after the Asian Financial Crisis hit Hong Kong, which was then followed by the turbulence of the global financial system as a result of the abrupt collapse of the LTCM. It was rather unfortunate that the fear I expressed in 1999 has come true ten years later. The international community has failed to learn the lessons from the Asian Financial Crisis and the LTCM debacle and to make the financial system more robust and safer. As a result, we have been punished, and punished very, very severely. The latest Financial Tsunami, dubbed as “Once in a Century”, has demonstrated that somehow all the key safety valves and gatekeepers have failed functioning properly to prevent excessive leverage and risktaking within the financial system, leading to very heavy fiscal and social costs in the subsequent bail-outs. 4. Now the international community, led by G20, is trying very hard to draw lessons from this latest financial crisis. I sense that there is a very strong resolve to do something this time round.