Statement by Deputy Secretary Kimmitt,
on U.S. –EU Open Investment Statement

Washington, DC-- Treasury Deputy Secretary Robert M. Kimmitt welcomed the issuance of the U.S.--EU Open Investment Statement by the United States and the European Commission. The statement echoes President Bush's May 2007 Statement on Open Economies and signals the continued commitment of the world's two largest economies to promoting open investment policies both at home and abroad. The statement was announced at a meeting this week of the Transatlantic Economic Council in Brussels, Belgium, which Deputy Secretary Kimmitt attended, and was developed by the U.S.-EU Investment Dialogue, which works to reduce transatlantic and global investment barriers.

"Trade and foreign investment create jobs, bring healthy competition, encourage companies to innovate and improve, and give consumers a wider variety of choices and lower prices on everything from food to clothes to cars," said Kimmitt. "By maintaining open economies and increasing investment opportunities, the United States and the European Union will enhance transatlantic economic ties and strengthen efforts to increase openness around the world that will deliver economic growth and job creation."

REPORTS

• U.S.—EU Open Investment Statement

Statement by Assistant Secretary for International Affairs Clay Lowery
before the 41st Annual Meeting of the Asian Development Bank

Madrid, Spain -- It is delightful to be here in Madrid for these meetings, and I would like to thank our gracious hosts, the Government of Spain and the City of Madrid, for their warm hospitality. We want to thank them for hosting the successful replenishment of the Asian Development Fund – which like Real Madrid's triumph last night – needed the final minutes for a result. Let me begin on a sad note and say that our hearts go out to the victims of the cyclone that hit Burma over the weekend.

In the United States, we are going through a difficult housing correction that has impacted our capital markets. We are taking a number of aggressive measures to minimize the downturn's effect. We believe our long-run fundamentals remain sound and we have confidence that we will work through this period.

Much of the rest of the world is suffering from large increase in global food prices, and the response requires both immediate and medium-term actions. We applaud the ADB's announced intention to take both kinds of action consistent with its comparative advantage and strategic vision. Structurally and strategically, we believe the most meaningful manner in which the ADB can contribute is by strengthening agricultural productivity through building rural infrastructure and providing appropriately scaled financing initiatives for farmers and rural organizations.

Asia is the world's fastest growing region, and despite the sharp rise in commodity and food prices and the recent slowdown in the United States, the ADB is forecasting growth in Asian developing economies of 7.6 percent in 2008. As the ADB itself forecasts, by 2020 Asia and the Pacific will account for more than 25 percent of global GDP in nominal dollar terms, have 90 percent of its population living in middle income countries and have only 2 percent of the population living on less than $1 per day.

While some countries have roared ahead, however, others have lagged behind and too many are still among the world's poorest countries. They need the institutional and policy reforms that create opportunities for private sector job creation, sustained growth and improved living standards. Infrastructure gaps prevent the connections to markets and products that drive essential private-sector commerce, both within and across borders. And where incomes have grown significantly, rapid growth is putting strains on the environment and natural resources.

To address these challenges, the ADB should put its efforts into three areas: building on the replenishment, adapting to changes in middle income countries, and strengthening institutional reforms.

First, we applaud the agreement's clear focus on the Bank's comparative advantage, focusing on four key areas – infrastructure finance, the enabling environment for private sector development, basic education, and preventing environmental degradation. On this last point, we look forward to close cooperation with ADB as the United States and other bilateral donors launch the Clean Technology Fund to help developing countries finance advanced technologies to cut greenhouse gas emissions.

Second, the ADB's role in middle-income countries has been a matter of rich debate among shareholders and we urge continued dialogue as we try to determine the optimal mode of engagement with countries that still face crucial development challenges even as they succeed and gain access to private financial markets. In some countries, this will mean shifting from financial assistance to fee-based policy guidance of the kind that the Bank is uniquely qualified to provide. Adaptation to change is a challenge, but it also presents a tremendous opportunity for the Bank to use its knowledge to help countries in new ways, and we look forward to helping the Bank stay true to its Charter.

Third, my boss Secretary Paulson likes to say that private entities that do not reform with the times go bankrupt, whereas public entities become irrelevant. At the ADB, we think a number of changes are needed to avoid being irrelevant. The ADB needs to ensure that it measures and manages for development results and its evaluation unit remains independent.

And, some have asked me why the United States cares so much about the human resources department. My answer is that the most valuable asset of the ADB is its people. The recruitment, retention, and career development of the kind of dedicated, qualified professionals needed by the Bank to fulfill its mission are central to the ADB's success. It is imperative that the management take concrete steps to professionalize human resources management. One place to start is scrapping the anachronism at many levels of the organization for a bias toward nationality as opposed to merit.

We think with efforts in these three areas – combined with the solid work in such countries as Afghanistan – the Bank will truly have a long-term strategy.

I would like to close by thanking President Kuroda and the entire bank staff for their work in preparing for our meetings here in Madrid, and my government looks forward to continuing our work with the Bank and fellow shareholders as we pursue our common vision of a region of growth and prosperity for all its citizens. Thank you very much.

Assistant Secretary for Financial Markets Anthony W. Ryan
May 2008 Quarterly Refunding Statement

Washington, DC--We are offering $21.0 billion of Treasury securities to refund approximately $74.0 billion of privately held securities maturing on May 15 and to pay down approximately $53.0 billion.  The securities are:

• A new 10-year note in the amount of $15.0 billion, maturing May 15, 2018;
• A 29 ¾ -year bond in the amount of $6.0 billion, maturing February 15, 2038

These securities will be auctioned on a yield basis at 1:00 p.m. EDT on Wednesday, May 7, and Thursday, May 8, respectively.  Both of these auctions will settle on Thursday, May 15.  The balance of our financing requirements will be met with weekly bills, monthly 2-year and 5-year notes, the June 10-year note reopening and the July 10-year TIPS offering and 20-year TIPS reopening.

In addition, Treasury will commence issuing a 52-week bill, with the initial announcement on Thursday, May 29 at 11:00 a.m. EDT, the initial auction on Tuesday, June 3 at 1:00 p.m. EDT, and settlement on Thursday, June 5. Treasury will auction this security once every four weeks, concurrently with the 4-week bill, with settlement two days later on Thursday.

Treasury also expects to issue cash management bills in May, June, August, and September.  Some of these cash management bills may be longer-dated.  The issuance of longer-dated cash management bills is in response to stimulus program payments and other potential seasonal fluctuations in cash balances. 

Changes in Borrowing Needs and Treasury's Response

Over the last several months, changes in economic conditions, financial markets, and monetary and fiscal policy have impacted Treasury's marketable borrowing needs. Financial market strains have impacted the real economy, and the nation has experienced lower economic growth, lower receipts, and increased outlays.

As a result, projected marketable borrowing requirements have increased significantly over the last three months, driven by changes in the deficit estimate, a decline in SLGS issuance, and redemption and outright sale activity undertaken by the Federal Reserve in its System Open Market Account (SOMA).

Treasury has responded to the increase in marketable borrowing requirements in its traditional manner and consistent with our comments in the February 2008 quarterly refunding statements.  Over the past several months, as borrowing needs have accelerated rapidly, the Treasury has significantly increased issuance sizes of regular bills, the frequency, terms, and issuance sizes of cash management bills, and the issuance sizes of shorter and intermediate-term nominal note offerings.  

Given issuance sizes of securities on our current offerings calendar, future borrowing needs for the remainder of fiscal year 2008, as well as deficit projections for fiscal year 2009, we believe it prudent to add an additional maturity point at this time.  Treasury will continue to monitor our projected fiscal needs and make adjustments as necessary.  

Auction Calendar Addition with Issuance of the 52-week bill

Treasury will commence issuing a 52-week bill, with the initial auction on Tuesday, June 3 at 1:00 p.m. EDT and settlement on Thursday, June 5. The announcement date for this initial bill will be Thursday, May 29, 2008 at 11:00 a.m. EDT.

In the future, Treasury will announce the size of 52-week bills once every four weeks on the Thursday prior to auction in conjunction with the announcement of sizes of the 13-week and 26-week bills. This security will be auctioned once every four weeks, concurrently with the 4-week bill on Tuesdays at 1:00 p.m.  Settlement for the 52-week bill will be, as with all other bills, on Thursday.

The addition of the 52-week bill should help reduce Treasury's reliance on cash management bill issuance.

Financing Needs in Fiscal Year 2008

We anticipate continued increases in bill and nominal coupon issuance over the remainder of fiscal year 2008 to address increases in net marketable borrowing needs associated with the fiscal outlook.  

Financing considerations related to the Federal Reserve (SOMA)

While the decisions of the Federal Reserve are independent of the Department, Treasury may also need to alter weekly bill issuance sizes or to issue additional cash management bills to offset cash shortfalls arising from Federal Reserve redemptions and open market sales of Treasury securities.  Treasury will adjust such issuance as transparently as possible.

Introduction of the New Treasury Auction System

On April 7, 2008, as part of its Cash-Debt management modernization initiative, Treasury introduced its New Treasury Automated Auction Processing System (NTAAPS).  This enhanced auction system significantly upgrades Treasury's auction process by improving system flexibility, reliability, security, analytics and transparency.

Notable improvements include the following:

• Bidders receive immediate system feedback regarding receipt of their bids.
• Award notices are available immediately after auction close.  Previously, it took upwards of 20 minutes for successful bidders to receive award notices. 
• Treasury publishes preliminary results of the offering amount awarded to non-competitive tenders 15 minutes before auction close.
• An enhanced user experience to provide ease in data entry.
• Robust fail-safes in case of contingency situations.
• $100 minimum denominations of marketable debt instead of $1000 to broaden access to all market participants.

Treasury Repo Market and Private Sector Initiatives

Treasury continues to encourage efforts by the private sector – notably initiatives taken by members of the Securities Industry and Financial Markets Association (SIFMA) and the Treasury Markets Practices Group (TMPG) - to address issues related to the Treasury financing market.  The current low interest rate environment potentially leads to an increased likelihood of chronic fails in the Treasury repo market. Such activity is not favorable for Treasury market liquidity.

Treasury strongly believes that the private sector, given its interest in maintaining robust financing markets, should implement initiatives discussed over the past three months in a proactive manner.

In addition, private sector participants should take additional steps from a monitoring and supervisory perspective to ensure that fails do not reach levels that impact financing markets. 

Treasury will continue to routinely monitor the Treasury financing markets, and encourage additional steps when necessary.

Please send comments and suggestions on these subjects or others relating to Treasury debt management to debt.management@do.treas.gov. 

The next quarterly refunding announcement will take place on Wednesday, July 30, 2008.

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Nason Statement On Insurance Information Act

Washington- Treasury Assistant Secretary for Financial Institutions David G. Nason released the following statement today regarding H.R. 5840, the Insurance Information Act of 2008:

"The Treasury Department welcomes Subcommittee Chairman Kanjorski and Ranking Member Pryce's introduction of legislation to create a federal insurance adviser within the Department of the Treasury. This legislation, similar to a proposal in Treasury's Blueprint for a Modernized Regulatory Structure, would help the United States address international regulatory issues affecting our markets' competitiveness. We look forward to working with Congress to move this idea forward."