U.S. government financial strategy the right one, Paulson says
Last Updated: Monday, December 1, 2008 | 4:24 PM ET
CBC News
Treasury Secretary Henry Paulson, shown in October, said the U.S. government is on the right track in terms of easing the credit crisis.
(Freddie Lee/FOX News Sunday/Associated Press) The U.S. government expects banks will make more loans and the downward pressure on house prices — "the root of our economic and market difficulties" — will ease, Treasury Secretary Henry Paulson said Monday.
It is important that banks start lending again, that the rate of foreclosures drops, and mortgage rates fall so people can buy houses and refinance their current homes more cheaply, he told a Washington audience.
The billions the U.S. government has made available to banks, lenders and consumers should do that, but when it comes to banks, "this lending won't materialize as fast as any of us would like."
It is happening more quickly than it otherwise would because government initiatives are helping restore confidence, said Paulson.
"I have confidence that we are pursuing the right strategy to stabilize the financial system and support the flow of credit into our economy."
The treasury is also developing additional programs, and is "continuing to examine potential foreclosure mitigation ideas," he said. As the ideas develop, the treasury will discuss them with the Congress and the incoming administration headed by president-elect Barack Obama.
Rate cuts possible
Earlier Monday, Federal Reserve chairman Ben Bernanke said the U.S. central bank may cut interest rates from the current one per cent.
With the rate so close to zero, the Fed doesn't have a lot of room to move.
Nonetheless, many economists expect the Fed leaders will cut the rate at the meeting set for Dec. 15 and 16.
In prepared remarks delivered in Austin, Texas, Bernanke said another rate cut is "certainly feasible," but may not kickstart the economy.
The Fed cut its key rate by half a percentage point to one per cent, the lowest in four years, on Oct. 29.
The Bank of Canada cut its key rate by a quarter-point to 2.25 per cent on Oct. 21. Its next interest-rate announcement is set for Dec. 9.
With files from the Associated Press
