Finance rescue working, broader action needed: Paulson

November 13th, 2008 - 12:40 am ICT by IANS  

Washington, Nov 12 (DPA) US Treasury Secretary Henry Paulson Wednesday said the government’s massive intervention in capital markets has prevented a “broad systemic event” but warned the financial system “remains fragile” and needs broader help.Actions taken by the Treasury Department in the past weeks “have clearly helped stabilize our financial system” after it had reached a “tipping point”, Paulson said at a press conference.

In detailing how the $700-billion bail-out programme has been used so far, Paulson said that his department had put aside the original idea of buying up bad mortgage assets from financial firms in favour of direct injections of capital into both struggling and healthy banks.

To broaden the programme, Paulson said consideration was being given to extending help to non-bank financial institutions and putting more money into consumer credit sources to make car loans, student loans and credit cards more available.

Paulson said he could not foresee that the bail-out programme, known as the Troubled Assets Relief Program (TARP), could also be used to help ailing automakers as congressional Democrats have requested, although he agreed they were “critical” to the US manufacturing industry. He said TARP was aimed at helping only the finance industry and unblocking credit.

“I think the administration needs a solution, but it’s got to be one that leads to viability” of the auto industry, Paulson said.

With 19 leaders converging on Washington Friday and Saturday in an emergency summit of the G20 to address the global finance crisis, Paulson also extended a “mea culpa” of sorts to the world.

“We in the US are well aware and humbled by our own failings and recognize our special responsibility to the global economy,” Paulson said.

“The US housing correction exposed gaping shortcomings in the outdated US regulatory system, shortcomings in other regulatory regimes and excesses in US and European financial institutions.”

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