Hank Paulson: US companies will continue to collapse in coming weeks
Hank Paulson, the US Treasury Secretary, has warned that more banks and businesses will fail amid the financial crisis despite America’s $700 billion bail-out plan.
By Gordon Rayner and Jonathan Sibun
Mr Paulson said US companies will continue to collapse in the coming weeks and months despite efforts by the American government to rescue its ailing economy and financial markets.
Mr Paulson called for patience, saying: “the turmoil will not end quickly and significant challenges remain ahead”.
He added: “Neither passage of this new law nor the implementation of these initiatives will bring an immediate end to current difficulties.”
Speaking after the Federal Reserve’s decision to cut interest rates by half a per cent, Mr Paulson said: “US and global financial markets continue to be severely strained.”
He said it would be several weeks before the bail-out plan makes its first purchases of troubled assets, and warned that even when the plan is implemented more banks are likely to fail.
Calling for a special meeting of the G20 group of leading industrial nations, he said: “In consultation with Brazil, the G20 president, I am calling for a special meeting of the G20 that will include senior finance officials, central bankers, and regulators from key emerging economies to discuss how we might coordinate to lessen the effects of global market turmoil and the economic slowdown on all of our countries.”
The Treasury, Federal Reserve and Federal Deposit Insurance Corp. will “use all their authorities to promote the process of repair and recovery and to contain risks to the financial system that might arise from problems at individual institutions,” Mr Paulson added.
“It is the policy of the federal government to use all resources at its disposal to make our financial system stronger,” he said. “We will use all of the tools we’ve been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size.”
Claiming the “ultimate taxpayer protection will be a stable financial system”, Mr Paulson said financial markets were suffering the joint challenges of system risk and a lack of confidence, capital and liquidity.
“Uncertainty has clogged our basic financial plumbing,” the Treasury chief said, pointing out that consumers and businesses were having trouble getting student loans or mortgages.
In a veiled attack at governments including Ireland and Greece, which have made unilateral moves to save their own banking systems, Mr Paulson said: “We must take care to ensure that our actions are closely co-ordinated and communicated so that the action of one country does not come at the expense of others or the stability of the system as a whole.”