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Paulson: U.S. 'Must Get Through the Night First'

Treasury Secretary Hank Paulson just gave an update on the federal bailout and the state of the economy here in Washington moments ago, saying: "Today we continue to work through a severe financial crisis. While we are making progress, the journey ahead will continue to be a difficult one."

He added: "We have to get through the night first."

Paulson expressed disappointment that mortgage rates have barely budged, despite the unprecedented government intervention.

"The actions we have taken to stabilize and strengthen Fannie Mae and Freddie Mac, and through them to increase the flow of mortgage credit have insulated mortgage rates from the rapid increases and fluctuations in the cost of other credit," Paulson said. "But given that we have essentially guaranteed Fannie Mae and Freddie Mac securities, the rates on those securities – and corresponding mortgage rates – have not come down as much as we may have hoped."

In questions afterward, Paulson was his usual voluble self -- say this for the man, he doesn't duck questions -- tackling queries about further federal regulation of capital markets and the nature of American capitalism itself.

"We have to have the ability to look at hedge funds, and would need to have some kind of charter for hedge funds or for significant institutions above a certain size," Paulson said.

The question of regulation, Paulson said, "is not as simple as 'more.' "

Paulson said he'd like to see poorly underwritten mortgages be reviewed on the national level, not just on the state level.

Paulson repeated what he'd said earlier: Some of the steps he felt he has been forced to take during this bailout have been anathema to his free-market nature.

"This is not about the belief in the markets," he said. "The markets are the only way. Every other way has been discredited. But what we have to do now is to fight to make this system work the way it needs to work.

"It's our fault fault we let the system get so out of balance that it took crisis like this to figure out how to get it back in balance again," he said.

Paulson called his evident successor, New York Fed head Tim Geithner, "a safe pair of hands."

Here is the full text of Paulson's remarks.

--Frank Ahrens

By Frank Ahrens  |  December 1, 2008; 3:54 PM ET
Categories:  The Ticker  | Tags: Geithner, Paulson, bailout, lending, mortgage  
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