Paulson says bank-led fund will boost liquidity

NEW YORK (Reuters) - U.S. Treasury Secretary Henry Paulson said on Tuesday a bank-led fund intended to shore up structured investment vehicles will boost liquidity on higher-quality assets.

However, it would "take a while" for liquidity to return to the asset-backed commercial paper market, Paulson said on the Fox Business Network.

"Hopefully, this will speed up liquidity on higher quality assets. What is taking some time is the great complexity in the products. Some of the products have problems, so there is not a lot of confidence in all the products," he said.

Paulson was referring to a plan, unveiled on Monday, by Bank of America (BAC.N), Citigroup (C.N) and JPMorgan Chase and Co (JPM.N) to put together a fund aimed at preventing the dumping of billions of dollars of bonds linked to subprime mortgages and other debt.

He also said he was open to temporarily lifting investment limits on government-sponsored enterprises like Fannie Mae (FNM.N) and Freddie Mac (FRE.N).

Paulson reiterated that a strong dollar is in the nation's interest.

"I believe that currency value should be set in a competitive marketplace based underlying economic fundamentals," Paulson said.

(Additional reporting by Richard Leong)