WASHINGTON (Reuters) - Treasury Secretary Henry Paulson said Sunday that foreign banks will be able to unload bad financial assets under a $700 billion U.S. proposal aimed at restoring order during a devastating financial crisis.
“Yes, and they should. Because ... if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution,” Paulson said on ABC television’s “This Week with George Stephanopolous.”
Paulson was appearing on the Sunday television talk show circuit to provide details about the U.S. government plan for a sweeping bailout to mop up hundreds of billions of dollars in toxic mortgage debt.
The moves capped a week in which financial markets faced their most serious confluence of crises since the Great Depression in the 1930s and threatened national economies and the worldwide banking system.
Paulson defended the rescue package as painful and costly, but necessary to stabilize a financial system that has all but ground to a halt.
“The situation we had, where the markets are frozen and lending may not be available, is one that won’t be good for the American people,” he said.
“The fact that the taxpayer is in this position is painful to me.”
Paulson acknowledged that an emergency rescue plan aimed at stabilizing a financial system in freefall will cost taxpayers money, but argued that costs will not be as high the $700 billion limit of the package.
“The taxpayer is at risk,” he said on “Fox News Sunday” television program, but added, “It would be extraordinary circumstances, highly unlikely, that the cost will be anything like the amount you spend for the assets.”
Paulson said the U.S. government is pressuring financial authorities in other countries to adopt similar financial stabilization plans.
“We have a global financial system and we are talking very aggressively with other countries around the world, and encouraging them to do similar things, and I believe a number of them will,” he said.
Paulson said the sudden crisis was stunning but he expressed hope in U.S. economic resilience.
“I wouldn’t bet against the long-term fundamentals of this country,” he said on NBC’s “Meet the Press.” “But this is a humbling experience to see so much fragility in our capital markets, and ask how did we ever get here.”
“I’m confident Congress will move and move quickly,” Paulson he added.
Additional reporting by Thomas Ferraro