Treasury Secretary Henry Paulson said Tuesday the current financial challenges facing the country will persist for a number of months, but he said the economy will rebound.
Paulson, speaking to an audience in New York, said that the recovery will occur because the administration, working with the Federal Reserve, is committed to taking the necessary steps to strength the financial system.
He said that close cooperation with other countries is critical and cautioned that it is important for all nations to be careful to make sure that the actions they are taking to deal with the crisis do not come at the expense of other nations.
“Our government will do what is necessary to significantly strengthen our banks and financial institutions, enabling them to increase financing for the consumption and business investments that drive U.S. economic growth,” Paulson said in remarks to the National Committee on U.S.-China Relations. Copies of his remarks were released in Washington.
“Through a multitude of powerful actions we have and will demonstrate our commitment to unlocking our credit markets and minimizing the impact of the current instability on the rest of the U.S. economy,” Paulson said.
“Although we expect current challenges to continue for a number of months, we will overcome them as we have overcome every challenge our nation has ever faced,” Paulson said.
He said that dealing with the financial crisis required “dramatic steps” in the United States and close coordination with other nations. He specifically mentioned talks he has had with Chinese leaders including Vice Premier Wang Qishan, who was recently appointed to lead a newly created financial crisis committee in China.
“It is clear that China accepts its responsibility as a major world economy that will work with the United States and other partners to ensure global economic stability,” Paulson said.
Paulson said he was looking forward to the next round of high-level talks with China which will take place in Beijing in December. Paulson began the discussions, known as the Strategic Economic Dialogue, in 2006 as a way to deal with a number of trade tensions between the two nations that reflected America’s soaring trade gap with China.
Paulson has expressed the hope that the next administration will continue these talks but he said Tuesday night that for this to occur, the talks must produce concrete results.
Answering questions from the audience, Paulson said it was important for China to continue allowing its currency to rise in value against the dollar. U.S. manufacturers have complained that China has only allowed the yuan to increase in value by about 20 percent since July 2005 and more movement is needed to deal with the huge trade gap between the two countries.
Paulson called it an “unnatural act” to have an economy the size of China’s integrated into the global economy with a currency that does not reflect economic fundamentals.
In a separate appearance Tuesday, Paulson said in an interview on the “Charlie Rose Show” that the government’s efforts to deal with the credit crisis were working but he cautioned that the disruptions to the economy would continue to be felt for some time.
“We’ve got some challenging months ahead in terms of the impact of the credit crunch on the economy,” he said.