[7月21日] US Treasury Secretary: Economic Fundamentals are Sound
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Washington
20 July 2008
The Bush administration says the U.S. economy will continue to experience slow growth in the months ahead, but is fundamentally sound. VOA's Michael Bowman reports from Washington, where Treasury Secretary Henry Paulson gave his assessment of economic conditions after a week of turmoil in banking and mortgage sectors and wild fluctuations in oil prices.
Since late last year, U.S. gross domestic product has grown at a dramatically reduced pace, but managed to avert negative growth that would formally signal a recession.
Appearing on CBS' Face the Nation program, Treasury Secretary Paulson did not deny today's tough economic climate, but expressed confidence in America's long-term outlook.
"We are going through a challenging time with our economy," said Henry Paulson. "The three big issues we are facing right now are, first, the housing correction. Secondly, turmoil in the financial markets, and, thirdly, the high oil prices, which are going to prolong the slowdown. But our economy has very strong long-term fundamentals."
Since experiencing a boom from 2002 to 2006, housing values have shrunk in most parts of the country. In addition, the United States has experienced a rash of home foreclosures that have shaken confidence in lending institutions. Last week, signs emerged that the fallout is affecting the viability of two giant government-backed mortgage institutions (Fannie Mae and Freddie Mac), while at least one private domestic bank saw panicked customers lining up at the doors to withdraw funds.
Secretary Paulson says swift action is needed to reassure capital markets and thereby provide a boost to the housing sector.
"The key to getting through this tough economic period is to have the housing correction work its way through quickly, and to be able to get housing prices to stabilize," he said. "And a key there is to have buyers come into the market. And buyers need financing. So these [mortgage] institutions are very important."
The Bush administration is urging Congress to allow the federal government to purchase equity stakes in the troubled mortgage institutions, and to expand the federal credit lines available to them.
