A Note on the Continuing Concern Over the State of Financial Markets

Recent events in the financial markets, as well as recessionary fears and the continued market turbulence, have generated real concern on the part of investors. The recent buyout of Bear Stearns by JPMorgan Chase was orchestrated by the Federal Reserve and the Treasury Department, underscoring the fact that the "liquidity shock" that began in the summer of 2007 continues to work its way through the system.

The Federal Reserve has been vigilant in monitoring conditions in the financial markets and has acted with several policy tools to provide adequate liquidity to the financial system and to support economic growth. First, the Fed has cut its target federal funds rate by three percentage points. Second, the Fed has instituted a new lending facility to the banking system as a means of providing additional liquidity. Third, the Fed just instituted another lending facility designed to provide liquidity to major non-bank financial institutions. We expect that the Fed will cut its target federal funds rate further and will continue its vigilant monitoring and its proactive policies aimed at providing liquidity to the financial system.

It's important to place the current situation in its proper context. Public and private entities have often found innovative ways to limit the damage caused by disorder on the part of financial markets and institutions. Successful coordination between corporations, the Fed and other regulators has been visible during such previous crises as the market decline in 1987, the rescue of Long Term Capital Management in 1998 and the closure of the financial markets in the days following September 11, 2001. In this most recent challenge, institutions are using lessons learned from past situations, as well as applying new tactics.

Throughout this market stress, the TIAA General Account and TIAA-CREF's fixed income portfolios have had, and have maintained, low exposures to sub-prime securities and other types of fixed income securities that have been the focus of investor concern. Please see our detailed statement on this subject.

This reflects TIAA-CREF's disciplined investment approach, rooted in careful research and fundamental analysis. We are committed to an investment philosophy that seeks to deliver consistent growth for our investors, year after year. For nearly 90 years, we have used this investment philosophy through a variety of market cycles.

TIAA-CREF has been carefully tracking recent events in the financial markets. We expect the volatility in financial markets to remain elevated over the near term. As a result, financial institutions in the U.S. – and around the world – can be expected to report additional losses.

It is particularly important in times like these to stay focused on one's own long-term financial plans, rather than to succumb to the overall anxiety and discomfort reflected in the news. Financial dislocation often generates some attractively low prices for companies with favorable long-term prospects. Sticking to a plan creates the possibility of buying excellent assets at a discount, while selling into a market crisis can actually come at a significant cost to an investor.

As in more settled times, TIAA-CREF's investment portfolio managers, analysts and staff are continuing to construct portfolios that seek to take advantage of current market conditions in order to provide consistent, long-term growth. At TIAA-CREF we believe in the merits of maintaining a diversified portfolio. We urge investors not to let short-term turmoil in the economy or the financial markets distract them from either their long-term goals or their plans to achieve them.