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Paulson says US banking system sound, fundamentals of economy strong
23/7/2008 9:55

US Treasury Secretary Henry Paulson said yesterday that the US banking system is sound and the long-term fundamentals of economy are strong.

"I believe that the United States is on the right path to resolving market disruptions and building a stronger financial system," said Paulson in a speech delivered at the New York Public Library.

"Working through the current turmoil will take additional time, as markets and financial institutions continue to reassess risk and re-price securities across a number of asset classes and sectors," he said.

Paulson asked the public to be patient as regulators work through the challenges.

"I am well aware that financial market and housing challenges continue to concern America's families," said the Treasury chief, "Progress has not come in a straight line, and we need to remain patient as we work through these challenges."

Paulson again urged the Congress to pass this week his proposal to support the troubled Fannie Mae and Freddie Mac.

Of the US$5 trillion in debt and mortgage backed securities guarantees issued by these two companies, over US$3 trillion is held by US financial institutions, and over US$1.5 trillion held by institutions and central banks overseas, said Paulson.

"Because of their size and scope, Fannie and Freddie's stability is critical to financial market stability," he noted.

"Investors in our nation and around the world need to know that we understand how important these institutions are to our capital markets broadly, and to the US economy," he added.