Paulson Says U.S. to Use All `Authorities' in Crisis, further raiding public funds (Update3)
By Simon Kennedy and Rebecca Christie Oct. 8 (Bloomberg) -- Treasury Secretary Henry Paulson said he's considering plans to pump capital into U.S. financial institutions and pledged to use everything under his power to stem the worst credit crisis since the Great Depression. The Treasury, Federal Reserve and Federal Deposit Insurance Corp. will ``use all their authorities to promote the process of repair and recovery and to contain risks to the financial system that might arise from problems at individual institutions,'' Paulson said at a press conference today in Washington. Paulson stressed that the legislation Congress passed last week to rescue financial institutions gave him broad authority that he intends to use, beyond buying mortgage-related assets on banks' balance sheets. He indicated that an option available may be boosting bank capital with federal injections. ``It is the policy of the federal government to use all resources at its disposal to make our financial system stronger,'' Paulson said. ``We will use all of the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size.'' Paulson said the U.S. rescue program won't save all banks. ``One thing we must recognize -- even with the new Treasury authorities, some financial institutions will fail,'' Paulson said. Instead, regulators will take measures to limit the systemic risk from any single bank failure, he said. Paulson spoke two days before finance ministers and central bankers from the Group of Seven industrial nations gather in Washington for their first meeting since the financial crisis deepened last month. G-20 Meeting Paulson didn't rule out unveiling new programs following the meeting while noting it might ``not make sense to have identical policies'' because each countries' circumstances are different. U.K. Prime Minister Gordon Brown has suggested authorities act to guarantee lending in the interbank market. ``There may be areas to coordinate,'' said Treasury Undersecretary David McCormick. ``There is a bias to cooperate when it makes sense.'' Beyond the G-7 talks, McCormick said this weekend would feature a ``special meeting'' of finance officials from the Group of 20, which combines developed and emerging economies. ``We're reflecting a reality of the global economy,'' he said of the talks. President George W. Bush signed into law on Oct. 3 a measure that gives Paulson the authority to purchase as much as $700 billion in mortgage-related assets from financial institutions saddled with illiquid debt. `Major Downturn' Since then, the Standard & Poor's 500 Index is down about 10 percent, credit markets have tightened further and, earlier today, central banks around the world collaborated to cut interest rates in an unprecedented move to stem the crisis. ``Patience is also needed because the turmoil will not end quickly and significant challenges remain ahead,'' Paulson said. ``Neither passage of this new law nor the implementation of these initiatives will bring an immediate end to current difficulties.'' The Treasury this week is recruiting asset managers and other staff to carry out the rescue plan, which will be administered by a newly formed Office of Financial Stability in the Treasury's headquarters in Washington. The global economy is headed for a ``major downturn,'' the International Monetary Fund said in its World Economic Outlook released earlier today. Global growth is projected at 3 percent next year, down from 3.9 percent this year, the IMF said. In April, the IMF predicted a 25 percent chance of worldwide growth at or below 3 percent, which it said was ``equivalent to a global recession.'' ``The turmoil is a global phenomenon,'' McCormick said in a statement. ``We are all affected by it, and strengthened international collaboration is needed now more than ever to find collective solutions to achieve stable and efficient financial markets and restore health to the world economy.'' To contact the reporters on this story: Simon Kennedy in Washington at [EMAIL PROTECTED] Rebecca Christie in Washington at [EMAIL PROTECTED] Last Updated: October 8, 2008 18:54 EDT --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
