US Treasury Secretary Henry Paulson said today the US financial system remained sound despite current stresses and said he was prepared to take further actions if necessary to maintain stability.
In a briefing at the White House after the past weekend's crisis meetings in New York, Paulson said a correction in housing markets remained a key challenge and noted the government acted to take over mortgage finance companies Fannie Mae and Freddie Mac to reduce turmoil.
"I'm committed to working with regulators here and abroad, as well as policy-makers in Congress, to take additional necessary steps to maintain the stability and orderliness of our financial markets," Paulson said without elaborating.
He had been scheduled to testify before Congress on Tuesday on recent events including the seizure of Fannie Mae and Freddie Mac, but the hearing was postponed today.
Over the weekend, Paulson participated with top officials of the New York Federal Reserve Bank and the Securities and Exchange Commission in efforts to find a suitor for investment bank Lehman Brothers but refused to commit taxpayer funds to any rescue.
In the end, Lehman's holding company parent filed for bankruptcy. But now other financial institutions including insurer American International Group are in trouble and were meeting in New York with the New York Fed.
Mr Paulson was asked about reports that AIG wanted an emergency loan to help it through its troubles.
"What is going on right now in New York has got nothing to do with any bridge loan from the government," he replied. "What's going on in New York is a private sector effort, again, focused on dealing with an important issue that's, I think, important that the financial system work on right now, and there's not more I can say than that."
Paulson blamed what he described as an "archaic" regulatory system for many of the problems that the financial system is encountering now, though private analysts cite reckless lending practices as a heavy contributing factor.
"I'm playing the hand that was dealt me," said Paulson, who took over Treasury in mid-2006. "A lot of what I am dealing with (is) the consequences of things that were done often many years ago."
He predicted that until a deep slump in US housing prices levels off, "we're going to continue to have turmoil in the financial markets" but predicted that may not be far off.
"I believe that there is a reasonable chance that the biggest part of that housing correction can be behind us in a number of months," Paulson said, adding "I'm not saying two or three months, but in months as opposed to years."
Reuters