Paulson Says Capital Markets Show `Signs of Progress
U.S. Treasury Secretary Henry Paulson said financial market conditions have improved to the point that they will be influenced more by economic forces such as housing than by the credit crisis.
“I expect that financial markets will be driven less by the recent turmoil and more by broader economic conditions, and specifically, by the recovery of the housing sector,'' Paulson said in a speech in Washington. He reiterated his view that “we are closer to the end of the market turmoil than the beginning.''
Paulson said a Treasury-backed coalition of mortgage lenders working to help Americans at risk of losing their homes has made “enormous progress,'' signaling his ongoing opposition to congressional efforts to use government funds to alleviate a surge in foreclosures.
He criticized those who bought homes assuming prices would rise indefinitely as “speculators.''
His remarks came a day after Federal Reserve Chairman Ben S. Bernanke said banks need to raise capital to offset losses incurred from the credit crunch, reflecting concern that markets have yet to return to normal. The collapse of the subprime- mortgage market has led to more than $340 billion in asset writedowns and credit losses at financial institutions since the start of 2007.
“We are seeing signs of progress as capital and credit markets stabilize,'' Paulson said. “The markets are considerably calmer now than they were in March.''
`Additional Tools'
Paulson praised the Hope Now Alliance of mortgage lenders, servicers and counselors for helping at-risk borrowers, while adding that both the department and the group were working to improve results.
“We will continue to look for additional tools to reach and help homeowners and to make existing programs work more smoothly,'' he said, cautioning that more declines may occur in months ahead. “We know the correction has further to go, and so we should not be surprised at headlines that note rising foreclosures and falling home prices.''
Paulson said the $168 billion economic stimulus plan enacted in February will help result in “a faster pace of economic growth by the end of the year.''
After the speech Paulson, was asked about the dollar, which is down 10.6 percent against a trade-weighted basket of currencies from major U.S cashadvance.com. trading partners.
Dollar Policy
“A strong dollar is in our nation's interest,'' he said. “It is my job as Treasury secretary to not only emphasize how important the strong dollar is, but to really be working hard on policies that are going to enhance confidence in the U.S. economy and capital markets over time.''
To address the housing slump, the Senate Banking Committee yesterday tentatively agreed on an anti-foreclosure measure that would have Fannie Mae and Freddie Mac, the two largest holders of U.S. home loans, pay part of the bill for a federal program to insure mortgages for struggling borrowers through the Federal Housing Administration.
In response to a question, Paulson said he was “very encouraged'' that Senator Christopher Dodd, a Connecticut Democrat, and Senator Richard Shelby, a Republican from Alabama, are “making bipartisan progress, particularly as it relates to stronger oversight'' of Fannie Mae and Freddie Mac.
Paulson opposes a House bill passed last week that would have the FHA insure up to $300 billion in refinanced mortgages after loan holders agree to cut principal to make payments affordable. In today's speech, he called on Congress to pass legislation that will help enhance the role of the FHA and toughen oversight of Freddie Mac and Fannie Mae.
“It's never been more critical that markets have confidence in how these companies are overseen and regulated,'' Paulson said. “The time has come to get this done.''
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