U.S. Treasury Secretary Henry Paulson said…the housing market correction appears to be at or near its bottom and that troubles in the subprime mortgage market will not likely spread throughout the economy.
“We’ve clearly had a big correction in the housing market. Retail housing was growing for some time at a level that was not sustainable,” Paulson said in a speech to The Committee of 100, a business group in New York promoting better Chinese relations.
“I don’t see (subprime mortgage market troubles) imposing a serious problem. I think it’s going to be largely contained,” he added.
HENRY PAULSON: Well, let me say this. As you’ve pointed out, we’ve had a major housing correction in the U.S. The U.S. economy had been growing at a rate that was unsustainable and, in housing, it had clearly been growing at a rate for a number of years.
That correction was inevitable; that correction has now been significant. We think it is near the bottom. It will take a while to work its way through the system. Fortunately for us, we have a very diverse, healthy economy. There are other things that are positive that are offsetting that.
…So my very strong view is that we are near the bottom and that this will be contained as – the housing will be contained, and we’re fortunate that we have a diverse, healthy economy.
Treasury Secretary Henry Paulson said on Wednesday the repricing of credit risk was hitting financial markets, but U.S. subprime mortgage fallout remained largely contained due to the strongest global economy in decades.
Speaking to reporters in Beijing, where he ran into stiff resistance in persuading Chinese officials to let the yuan strengthen more quickly, Paulson said markets were unwinding excesses in U.S. mortgage and leveraged buyout financing.
European and Asian stocks tumbled on Wednesday following a sharp drop in U.S. shares on Tuesday, after American Home Mortgage Investment Corp. said it might have to liquidate assets, fuelling worries over problems in the subprime mortgage market spilling over into other sectors.
“The market has focused on this. There’s a wake-up call, and there’s an adjustment to this repricing of risk, but I see the underlying economy as being very healthy,” he told reporters before leaving Beijing.
Paulson added that he did not see anything that caused him to reconsider his view that the economic damage from the housing correction was “largely contained,” despite losses in a number of financial institutions and a long period for subprime issues to move through the economy.
Paulson: Subprime help needed – but no bailout
Treasury Secretary Hank Paulson is walking a fine line, pushing the need to help troubled mortgage borrowers without rewarding past risky behavior.
“I have no interest in bailing out lenders or property speculators. Still, we must recognize the very real harms to families affected by the housing downturn,” Paulson said in prepared remarks for a speech given Tuesday at Georgetown University.
…Although the speech seemed to mark a step up in activism on the part of the Treasury Department, Paulson was quick to point out the limitations of the government’s approach during the question and answer following the talk.
Referring to HopeNow, he said, “This is a 100 percent market-based solution. I believe in markets. The government is doing nothing here but facilitating people coming together.”
Paulson also downplayed the possibility that the housing crisis could plunge the nation into recession. “I’ve seen turbulence in the market a number of times and I can’t think of any situation where the backdrop of the global economy was as healthy as it is today,” he said.
The Bear Stearns bailout has come under scrutiny from critics questioning why the Fed can manage to funnel money to a major bank, but not to homeowners facing foreclosure, as Congressional Democrats have proposed.
In response, Paulson explained “what’s going on right now is an inevitable decline, and a necessary decline, in home prices.”
He went on to reiterate the administration’s desire to limit government intervention. “I’m looking very carefully at any proposal. But all the ones I’ve seen, which call for much more government intervention, raise more problems and do more harm than they would do good”
According to the Paulson plan, distressed assets will be sold by banks through a reverse auction (the low bid wins) to various investment funds, hedgies, private-equity boys, and other banks. And taxpayers will have a strong ownership position in these asset sales. When the assets are worked out over time – as they will be once housing and the economy recover – taxpayers will actually make money on the deal.
US Treasury Secretary Henry Paulson was humbled as tempers rose and threatened to scupper a deal to prevent world economic meltdown.
In a dramatic gesture to keep hopes alive, he got down on bended knee to plead with Democratic leader Nancy Pelosi to stay and keep talking.
At that point he feared her party might follow Republicans who stormed out of negotiations insisting the US taxpayer should not bail out failing institutions.
November 2008 (today)
WASHINGTON – Treasury Secretary Henry Paulson said Wednesday the $700 billion government rescue program will not be used to purchase troubled assets as originally planned.
Paulson said the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.
He announced a new goal for the program to support financial markets, which supply consumer credit in such areas as credit card debt, auto loans and student loans.
Is this kind of behavior going to demonstrate or help produce a new sense of confidence in our Finacial system. I think just the opposite, Here we have gone from Sub Prime mortgages to Private commercail banks melting down to buying up bad paper on the books of banks to buying banks now we are on to Credit Card Debt, Auto Loans and Student Loans. If you want my opinion Henry sounds like he has sounded the trumpets that the whole system is crashing. Look out the fall could be truely epic. Man the life boats and Pray.
As Usual Just my Opinions but please read for yourself it’s shocking.