Paulson Says More TARP Programs on the Way

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Treasury Secretary Henry Paulson said on Monday the Treasury is developing new programs under the Troubled Asset Relief Program (TARP) and that he's confident the Treasury is pursuing the right strategy.

"We are actively engaged in developing additional programs to strengthen our financial system so that lending flows into our economy," Paulson said. "When these programs are ready for implementation, we will discuss them with the Congress and the next Administration."

Delivering remarks at a Fortune 500 Forum in Washington, D.C., Paulson said he expects banks that have tapped the TARP to begin to lending, adding that it is important for them to do so.

"This lending won't materialize as fast as any of us would like, but it will happen much, much faster as confidence is restored as a result of having used the TARP to stabilize our system and to increase the capital in our banks," Paulson said.

Paulson commented that given the guarantees by the GSEs, mortgage rates "have not come down as much as we may have hoped".

In a question and answer session following his speech, Paulson commented about the NBER's official claim that the U.S. economy has been in recession since December 2007. Paulson said it has been clear for a while that the economy is slowing down, but said it is up to economists to officially call a recession.

When asked why he opposed the FDIC plan to mitigate foreclosures, Paulson responded, "I don't think I've opposed any plan." Paulson added that the Treasury has been on the forefront in developing programs, and that he believes the FDIC's IndyMac protocol is effective.

"The most important thing we can do to mitigate foreclosures and progress through the housing correction is to reduce the cost of mortgage finance, so more families can afford to buy a home, and so homeowners can refinance into more affordable mortgages," Paulson said.

Commenting on the use of TARP funds, Paulson maintained that they should be used for the financial sector.

Markets once again reacted negatively to Paulson's speech. As of 3:30 p.m., the S&P 500 was down 61 points, or 6.8%, to 835, the DJIA dropped 503 points, or 5.6%, to 8329 and the Nasdaq composite fell 104 points, or 6.7%, to 1432.

By Steve Stecyk and edited by Stephen Huebl
©CEP News Ltd. 2008