Paulson says prepared to act to ensure stability

U.S. Treasury Secretary Henry Paulson speaks to reporters in the briefing room of the White House following his meeting about the economy with U.S. President George W. Bush Washington September 15, 2008.

WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson said on Monday the U.S. financial system remained sound despite current stresses and said he was prepared to take further actions if necessary to maintain stability.

In a briefing at the White House after the past weekend's crisis meetings in New York over the fate of Lehman Brothers, Paulson said a correction in housing markets remained a key challenge. He also noted the government acted to take over mortgage finance companies Fannie Mae and Freddie Mac to reduce turmoil.

"I'm committed to working with regulators here and abroad, as well as policymakers in Congress, to take additional necessary steps to maintain the stability and orderliness of our financial markets," Paulson said without elaborating.

Over the weekend, Paulson participated with top officials of the New York Federal Reserve Bank and the Securities and Exchange Commission in efforts to find a suitor for investment bank Lehman Brothers but refused to commit taxpayer funds to any rescue.

In the end, Lehman's holding company parent filed for bankruptcy. But other financial institutions are struggling, including insurer American International Group, which was meeting in New York with the New York Fed.

Paulson was asked about reports that AIG wanted an emergency loan to help it through its troubles.

"What is going on right now in New York has got nothing to do with any bridge loan from the government," he replied. "What's going on in New York is a private sector effort, again, focused on dealing with an important issue that's, I think, important that the financial system work on right now, and there's not more I can say than that.

(Reporting by Glenn Somerville, Editing by Chizu Nomiyama,)