Paulson says no quick fix for credit problems
Paulson says no quick fix for credit problems
By FT reporters and agencies
Copyright The Financial Times Limited 2007
Published: August 21 2007 15:39 | Last updated: August 21 2007 16:43
Wall Street stocks were lower by mid-morning on Tuesday, after Henry Paulson, the US Treasury secretary, said he saw no quick solution to problems in the credit markets.
“Credit is being repriced, reassessed across our capital markets,” Mr Paulson told CNBC television.
”As the Fed addresses liquidity this makes it possible, this makes it easier, for the market to focus on risk and pricing risk. This will play out over time and liquidity will return to normal when the market has a better understanding, investors have a better understanding, of the risk-return trade off.”
Mr Paulson said the overall strength of the economy was sound, but added: ”Economic growth will be less than it ordinarily would have been.”
Mr Paulson and Ben Bernanke, Federal Reserve Chairman, met Christopher Dodd, Senate Banking Committee Chairman, on Tuesday morning to discuss market turbulence and what can be done to stabilise the economy.
Mr Dodd said that he had urged Mr Bernanke to use “all of the tools at his disposal here to keep our markets working”.
The Democratic senator for Connecticut who is seeking his party’s presidential nomination also said that he asked the Bush administration to lift portfolio caps for state-backed mortgage giants Freddie Mac and Fannie Mae, but that Mr Paulson had said that such a move was unlikely at the moment.
Mr Dodd said allowing the two companies to expand their mortgage portfolios would help bring stability to housing markets.
Last week the Fed cut its overnight discount rate by 50 basis points. While that initially gave markets a boost, the rally ran out of steam on Monday, with the S&P 500 index closing marginally lower for the day.
By FT reporters and agencies
Copyright The Financial Times Limited 2007
Published: August 21 2007 15:39 | Last updated: August 21 2007 16:43
Wall Street stocks were lower by mid-morning on Tuesday, after Henry Paulson, the US Treasury secretary, said he saw no quick solution to problems in the credit markets.
“Credit is being repriced, reassessed across our capital markets,” Mr Paulson told CNBC television.
”As the Fed addresses liquidity this makes it possible, this makes it easier, for the market to focus on risk and pricing risk. This will play out over time and liquidity will return to normal when the market has a better understanding, investors have a better understanding, of the risk-return trade off.”
Mr Paulson said the overall strength of the economy was sound, but added: ”Economic growth will be less than it ordinarily would have been.”
Mr Paulson and Ben Bernanke, Federal Reserve Chairman, met Christopher Dodd, Senate Banking Committee Chairman, on Tuesday morning to discuss market turbulence and what can be done to stabilise the economy.
Mr Dodd said that he had urged Mr Bernanke to use “all of the tools at his disposal here to keep our markets working”.
The Democratic senator for Connecticut who is seeking his party’s presidential nomination also said that he asked the Bush administration to lift portfolio caps for state-backed mortgage giants Freddie Mac and Fannie Mae, but that Mr Paulson had said that such a move was unlikely at the moment.
Mr Dodd said allowing the two companies to expand their mortgage portfolios would help bring stability to housing markets.
Last week the Fed cut its overnight discount rate by 50 basis points. While that initially gave markets a boost, the rally ran out of steam on Monday, with the S&P 500 index closing marginally lower for the day.
posted by Carlos T Mock at 9:09 AM
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