Paulson says Feb job losses no surprise

By David Lawder

STANFORD, California (Reuters) - U.S. Treasury Secretary Henry Paulson said on Friday that February job losses were unwelcome but not surprising, and urged major financial institutions to raise capital to keep lending taps open during a difficult period.

Paulson, who was visiting California to discuss the economy, spoke to reporters after the Labor Department reported that 63,000 jobs were lost last month, on top of 22,000 lost in January.

"Clearly these jobs numbers that came out today are not welcome, and not good news," Paulson told a news conference, adding, "To me it wasn't a surprise."

Many private-sector economists have said that recent gloomy data show that a recession is at hand and the question now is how deep it will be. Paulson has resisted a declaration that the economy would fall into recession, saying instead that the Bush administration and Congress anticipated the current weakness by enacting a $152 billion economic stimulus plan designed to jolt the economy back to life.

"This is a tough quarter, we know it. We did what we've done in anticipation of this," he said.

Tax rebate checks of $600 for most individuals and $1,200 for most couples will start to be distributed by early May.

Paulson said he would continue to resist calls in Congress for bolder government actions to prop up the housing market.

"Some in Washington are proposing big interventions. Most of the proposals I've seen will do more harm than good. I still have no interest in bailing out investors, lenders or speculators," he said.

His main effort is to promote a voluntary program among most mortgage lenders and servicers to work out new, more affordable loan terms for distressed borrowers who want to stay in their homes.

Paulson told reporters earlier on Friday that he wanted government-sponsored housing finance giants Fannie Mae and Freddie Mac to raise capital so that they could keep lending despite stress in the market for mortgage-backed securities.

"I want them to raise equity. They can raise equity without legislation," Paulson said, adding that he also wanted Congress to pass legislation creating stronger oversight of the massive enterprises.

But he added that the House of Representatives and Senate were "very close to getting a compromise" on a bill that would modernize the Federal Housing Administration and raise lending limits for federally guaranteed loans. This would help an additional 300,000 distressed borrowers to refinance their mortgages, he said.

STILL EYEING STRONG DOLLAR

Paulson also reiterated his long-standing view that a strong dollar was in the United States' interest.

"Our economy, like any other has got its ups and downs. The long-term fundamentals are strong. And I'm confident they'll be reflected in currency market," he told the Stanford audience.