CORRECTED: Ex-Treasury head Rubin says economy faces risk

WASHINGTON (Reuters) - Former Treasury Secretary Robert Rubin said on Wednesday the U.S. economy faces significant risk in the short term.

"We are facing significant risk with respect to shorter-term economic conditions," Rubin said in a speech to the U.S. Conference of Mayors.

Rubin, who was Treasury Secretary from 1995-1999 under President Bill Clinton, is currently a top official at Citigroup.

His comments come as a growing number of analysts are forecasting that world's biggest economy will shrink as a result of a prolonged housing downturn and a credit crisis triggered by worries over defaults on risky mortgages.

Rubin praised the Federal Reserve's handling of the economic turmoil that burst into public awareness over the summer. The U.S. central bank has trimmed a key interest rate by one and three-quarter percentage points to 3.5 percent, including a surprise three-quarter point cut on Tuesday, and auctioned short-term funds to cash-strapped financial institutions.

"The Fed has acted wisely with respect both to interest rates ... and ... to the availability of credit," Rubin said.

At the same time, Rubin noted the Fed's rate-cutting action carries with it the risk that it will "heighten softness with respect to our currency."

"Any time that the Fed lowers rates, if you already have a soft dollar, it leads to the possibility that it could have an adverse effect," he told reporters after his remarks.

(Reporting by Glenn Somerville; Writing by Mark Felsenthal)