Tue, Aug 12, 2008 page10

• Paulson rules out staying on after Bush

  ‘TURMOIL’ The Treasury chief disagrees with Democratic leaders who want a second stimulus plan to boost the US economy, following February’s US$168 billion package

  • AFP
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  US Treasury Secretary Henry Paulson believes the US housing market will remain in a slump through the rest of the year, but does not intend to stay on to help the next president cope with the crisis.

  In an interview with NBC News airing on Sunday from Beijing, Paulson said he did not plan to inject public money into two troubled US mortgage giants, and laid out the case for new regulation to keep capital markets under control.
  
  

  Whether the next president is Senator John McCain or Senator Barack Obama, “I will do everything I can to make for a smooth transition, to work closely with my successor in Treasury,” he said.
  
  

  There has been media speculation that the McCain or even Obama could ask Paulson to stay on to help unwind the housing crisis buffeting US consumers and Wall Street.
  
  

  “But I’m focused on getting everything done I can get done between now and January 19th,” the former Goldman Sachs boss said, referring to the last full day of US President George W. Bush’s administration.
  
  

  “I’m going to do everything I can to step up to any problems that are going to face the country, but again, I look forward to doing other things, you know, next year,” he said.
  
  

  In the interview, which was taped Saturday, Paulson reaffirmed that “I believe it is going to take us well beyond the end of the year to work through all of the housing problems.” Until the housing market starts to recover, “we’re going to continue to have turmoil in our capital markets.”
  
  

  But he stressed that in the global rankings of major economies, “the long-term economic fundamentals of the United States compare very favorably.”
  
  

  Paulson defended a government lifeline thrown to the mortgage finance giants Freddie Mac and Fannie Mae, which together account for about 70 percent of all US home loans. Plunging share values and shocking losses have raised new questions about the two firms’ solvency, but Paulson said he had no plans to tap his new authority to buy equity in the companies to boost their capital.
  
  

  “Well, we have no plans to insert money in either of those institutions,” he told NBC.
  
  

  “I think it was very important that we get these temporary backup facilities, because Fannie and Freddie are important to our capital markets broadly,” he said.
  
  

  He disagreed with Democratic leaders, including Obama, who want a second stimulus plan to boost the US economy, following a US$168 billion package stuffed with tax rebates that was enacted in February.
  
  

  He said that following US economic growth of 1.9 percent in the second quarter, which was better than the first quarter’s 0.9 percent pace, “my view would be let’s see how this program works in the third quarter.”
  
  

  Paulson, agreeing with Bush that Wall Street had got “drunk” and was now suffering a hangover, said new regulation was needed to cope with the daunting complexity of modern banking’s investment practices.
  
  

  “We have a regulatory system that is very outdated. It was put in place many years ago,” he said, calling for a legal revamp “across the board.”
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