Paulson: Home price correction must continue

WASHINGTON (Reuters) - Treasury Secretary Henry Paulson said on Wednesday it would be counterproductive for the government to try prevent a correction in housing prices because that would prolong the sector's problems.

"We're working hard to prevent avoidable foreclosures," Paulson told the House Budget Committee in response to a question regarding his statement that the U.S. economy was experiencing a "significant and necessary housing correction."

"The word necessary means that when markets get out of whack, it is counterproductive for the government to get in and stand in the way, because that creates all kinds of other distortions and prolongs the problem," Paulson said. "Markets don't go up at the rates in which these housing prices went up without coming down."

(Reporting by David Lawder; Editing by Tom Hals)