Paulson cites Fed role in market stability

WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson said on Friday he appreciated the Federal Reserve's leadership in enhancing market stability and addressing financial challenges, saying such efforts would minimize disruptions.

Paulson did not specifically mention the Fed's approval of a deal with JP Morgan Chase & Co to provide new funding for Bear Stearns & Co, but referred to "another challenge."

"This is another challenge that market participants and regulators are addressing," Paulson said in a statement. "We are working closely with the Federal Reserve and the SEC. I appreciate the leadership of the Federal Reserve in enhancing the stability and orderliness of our markets."

JPMorgan Chase and the Federal Reserve Bank of New York on Friday agreed to provide emergency financing to Bear Stearns after the investment bank said its cash position had deteriorated sharply. For more, see

Separately, the Securities and Exchange Commission said it was working closely with the Treasury, the Federal Reserve Board and the New York Fed "in a way that contributes to orderly and liquid markets."

Paulson also expressed confidence that regulators and market participants will be able to deal with the market challenges, whose roots lie in a severe downturn in the U.S. housing market.

"Our financial system is flexible and resilient and I am confident that the efforts of regulators and market participants will minimize disruption to the system," Paulson said in the statement.

(Reporting by David Lawder; Editing by Leslie Adler)