fit and proper ’ test of their owners, and the nature of any capital injection. with regard to the state banks, all regional development banks will be recapitalized by the government such that they have a capital adequacy ratio of at least 4 %. mergers between the seven existing state banks will allow us to create some stronger and healthier banks. for instance, four out of the seven state banks will be merged to create bank mandiri, which is expected to comprise 30 % of banking system deposits in indonesia. as the restructuring of the state banks takes place, the government will inject additional capital needed by the banks on a step - by - step basis. the cost of the bank restructuring program will be significant. however, every effort will be taken to minimize this cost and in particular to recover loans from recalcitrant debtors. in terms of the interest cost to the government in 1999 / 2000, it is estimated at a total of rp 34 trillion or euro 3. 5 billion. of this amount we believe around rp 16 trillion will be recoverable from sales of assets pledged to ibra by the owners of the banks. i should like to stress that it is not the intention of the government to stay forever and dominate the banking sector. the government ’ s involvement in the capitalization of the banking sector is only temporary to help the sector recover from the deep problems it is currently experiencing. in three to five years ’ time the government ’ s share in the private banks will be divested, and these banks are expected to be pure privately owned banks once again. nor is the intention of the government to be involved in the day - to - day operation of the banks during the three - to five - year period. we only need to make sure that the banks are run properly and efficiently. and the mechanism of the recapitalization program has been designed such as to assure that these ideas are materialized. i can also report to you today that we will continue our efforts in the future to improve the security of our financial system further. we will implement organizational and cultural change in the way we manage bank supervision. we will also review the workings of the amended bankruptcy law and make alterations to ensure that the law works as intended to allow both domestic and international creditors to gain security over the assets of debtors in default. i look forward to reporting our progress in these matters to you in future meetings. ladies and gentlemen, i hope that i have given you a

all, who hears about the idea that never came to fruition - - but it serves as an important check in the policymaking process. as i mentioned, economic thinking at the cea has been marked by important continuities. nevertheless, the evolution of thinking at the cea over the years has reflected the economic challenges of each era as well as continuing developments in economic research. the ideas of keynesian stabilization that were an important motivation for the employment act reached their zenith during the kennedy administration. since that time, the cea has followed the economics profession away from a belief that fiscal policy can or should fine - tune the level of aggregate demand. during the 1960s and 1970s, the economy was confronted by rising inflation pressures, a series of energy shocks, and a slowdown in the underlying pace of productivity growth. at the same time, there was considerable ferment within the economics profession, as prevailing views of the inflation process and of the government's role in economic stabilization were challenged. successive ceas agonized over these issues and over whether to use the new ideas emerging from the academy and, if so, how. since the 1980s, the cea has focused increasingly on understanding the sources of economic growth and the supply side of the economy. the focus on international issues, too, has intensified as trade and international financial flows between the united states and other countries have grown. i should also note that, despite its overtly macroeconomic origins, the cea has expanded successfully into the realm of microeconomics, particularly issues related to regulatory policy and market structure. notwithstanding these changes in focus over time, there have been important intellectual continuities. in particular, a common theme throughout the cea's history has been a belief in the importance of market forces, and this belief stands as an important legacy of the cea. 2 / 3 of course, as chairman of the council during president ford's administration, i was close to some of these debates and decisions. i was recruited to serve as chairman of the council by president nixon's economic team. as it turned out, i was before the senate banking committee for confirmation the day that president nixon resigned. president ford quickly renominated me, and i began work at the cea in september 1974. i was privileged to serve president ford, and found him to be a very effective leader. parenthetically, there are some interesting parallels between president ford and president truman. both were serving as vice president