US Treasury Secretary Henry Paulson made the rounds of the television talk shows on Sunday. He stressed the fact that the nation’s credit markets are “very fragile and still frozen”, and called on Congress to move rather expeditiously on the Bush administration’s $700 billion proposal to bail out the financial system.
Paulson in an interview today on NBC’s Meet the Press, after addressing the issue of irresponsibility in lending practices, where many financial institutions disregarded and didn’t undertake proper and appropriate checks on the potential borrower’s creditworthiness and their ability to repay the loan and to meet the terms of the agreement, said that last week there were times when the capital markets or credit markets were frozen, and American companies weren’t able to raise financing.
The credit markets are right now frozen and we need to deal with this and deal with it quickly.
During this interview, Mr. Paulson also reiterated the fact that because mortgages are now securitized and sold all over the world and that the system faces significant risks from over complexity that makes all illiquid mortgage assets very difficult to value. This remains the main issue that needs to be addressed right now, Paulson said. He also added that an overhaul of the outdated U.S. regulatory system for financial markets is necessary. However, the first job, said Paulson, is to get the rescue package passed by Congress.
Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, agreed with Paulson that speedy passage of the bill was necessary.
On Saturday, the White House said it was ready to work with Congress to quickly enact legislation to allow the government to purchase hundreds of billions of dollars worth of bad mortgage-related assets from American based companies with a significant exposure to the collapse of the housing market.
Congressional aides and administration officials are working through the weekend to fill in the details of the proposal, and there aren’t any signs yet that Congress will delay or derail the proposal. All the parties involved, at least for the time being, appear to be in agreement on the big picture, namely the need and the cost.