U.S. Treasury Secretary Henry Paulson on Thursday expressed regret for the many errors made that led to the biggest financial crisis in seven decades, but he insisted the administration is pursuing the correct course now to end the debacle.
"We're not proud of all the mistakes that were made by many different people, different parties, failures of our regulatory system, failures of market discipline that got us here," Paulson said in an interview on the cable channel Fox Business Network.
But he said he had "no regrets" about the steps the government is taking now to address the problem.
"We will mitigate the impact on the real economy, and we'll get this financial system working again," he said.
Paulson rejected criticism about the new approach the administration announced on Tuesday, whereby the government will purchase $250 billion US in stock from private banks, in effect partially nationalizing the banking system.
He said the initial stock purchases would total $125 billion, with the money going to the country's nine largest banks, whose executives were summoned to a meeting with Paulson at the Treasury on Monday where he applied pressure to make sure they all participated.
Paulson said it was essential that the nine banks, which hold 50 per cent of the nation's bank deposits, participate so that there would not be a stigma attached to the program. He said it would encourage other banks that were in greater need of capital to take part.
"When there's fear in the marketplace and there's concern in the marketplace, no one wants to raise their hand and say, 'I need capital,' " Paulson said.
Paulson said there had been an interest "from a good number of other banks" for the other $125 billion the government has available to purchase bank stock. Potentially thousands of banks could be eligible for a portion of those funds.
The $250 billion is part of the $700-billion US bailout program for the financial system that Congress passed on Oct. 3 in an effort to get banks to resume more normal lending.
As the plan was rushed through Congress, Paulson and other officials stressed that the money was needed to buy up bad loans and mortgage-backed securities that are sitting on the books of banks and making them reluctant to make new loans.
Paulson said Thursday that the program's emphasis was changed after the legislation passed when market developments showed how critical it was to quickly shore up bank balance sheets with fresh capital. He said government was still moving ahead with the program to buy bad assets and the administration has allocated $100 billion for that portion of the program.
In a separate interview on Bloomberg television, Paulson refused to rule out the possibility that some of the $700-billion program could be used to shore up insurance companies or giant hedge funds, largely unregulated pools of investments. But he said that he was focused now on dealing with the problems at banks.
"This program is for banks and thrifts," he said, adding later, "Right now, we're focused on financial institutions that are regulated financial institutions."