WASHINGTON (Reuters) - Treasury Secretary Henry Paulson said on Monday the government was working on new programs to stimulate lending and expressed impatience that banks were not making more credit available.
Speaking to a Fortune 500 Forum, Paulson warned “a severe financial crisis” has yet to run its course but said Treasury was not relenting in its efforts to get the financial system onto a better footing that might bring stability.
“We are actively engaged in developing additional programs to strengthen our financial system so that lending flows into our economy,” he said, without offering any details. “When these programs are ready for implementation, we will discuss them with the Congress and the next administration.”
He also said that Treasury was “continuing to examine potential foreclosure mitigation ideas that may be an appropriate and effective use of TARP resources,” referring to the $700-billion Troubled Asset Relief Program that Congress approved and that has been used mainly to recapitalize banks.
All but $20 billion of the first $350 billion allocated under TARP has been committed through injections of capital into banks, insurer AIG and in support for housing finance companies Fannie Mae and Freddie Mac. It is unclear whether Paulson will ask Congress to release more money or leave that to President-elect Barack Obama’s administration.
The Bush administration now has less than two months left in office and Paulson made clear that he felt any banks that had received direct injections of TARP money or even benefited from its existence had a duty to boost lending.
“We expect banks to increase their lending as a result of these efforts and it is important that they do so,” he said.
During a question-and-answer period, Paulson declined direct comment on the declaration earlier in the day by the independent National Bureau of Economic Research that the U.S. economy slipped into recession in December 2007.
“The thing we have known, I have known, is we are in an economy that has slowed down significantly,” Paulson said. “The American people know that and I think the American people have known that for some time, so I don’t think this is going to be big news.”
Paulson said he was trying to slow the rate of home foreclosures by making sure that mortgages were available at lower cost and professed some disappointment that mortgage interest rates have not fallen more.
“Given that we have essentially guaranteed Fannie Mae and Freddie Mac securities, the rates on those securities -- and corresponding mortgage rates -- have not come down as much as we may have hoped,” Paulson said.
He praised Obama’s nominee for Treasury, New York Federal Reserve Bank President Timothy Geithner, describing him as “an internationalist” whom the country was lucky to get.
Paulson heads for China on Tuesday, leading a large delegation to a fifth round of a so-called “strategic economic dialogue” with China that is expected to discuss the global crisis that also is slowing Chinese exports.
U.S. Treasury officials said Paulson will again push China to keep letting its yuan currency to appreciate, presenting it as a necessary step to help reduce global imbalances including huge U.S. trade deficits with China.
Editing by Leslie Adler