Amid speculation that Treasury Secretary Henry Paulson would remain in his post to help the next president deal with the housing crisis, Paulson announced that he will not stay on during an interview on “Meet The Press” Sunday.
“I am very focused on getting everything done I can get done between now and January 19,” Paulson told moderator Tom Brokaw in Beijing. “I look forward to doing other things next year.”
Paulson told Brokaw that he thought it would take “well beyond” this year to work though the nation’s housing problems, and that they were at the heart of “our economic problems as a nation.” However, he does not plan on using his new authority to add capital into mortgage companies Freddie Mac and Fannie Mae, who are responsible for funding about 70 percent of mortgages in the United States.
Last month, Congress and Paulson worked on a plan to help the companies, which includes giving the Treasury the ability to buy their shares.
This week Freddie Mac announced a $821 million lost in the last quarter and Fannie Mae posted a $2.3 billion loss. Instead of inserting money to the companies, Paulson emphasized the need for regulation of the companies, which are government backed, but traded publicly.
"On the one hand they have a responsibility to shareholders, on the other they are a government sponsored entity and they haven’t had a regulator with the necessary powers,” Paulson said. “We can take some satisfaction in the fact that we now have a regulator that is going to begin to deal with these systemic issues.”
Paulson said the goal is to be in a position where no companies are considered too big to fail.
As Paulson deals with the economic situation at home, he has also been serving as an advisor in the U.S-China strategic economic dialog. He recently told BusinessWeek that his Chinese counterpart, Vice-Premier Wang Qishan said to him, “We’ve been listening a lot to you and now we find out that our teacher has problems.” Paulson said he responded, “Learn from us and you can avoid some of the mistakes.”
Part of why Congressional support of the mortgage companies was so important, Paulson told Brokaw, was to maintain confidence of global investors — there is a $400 billion Chinese investment in Fannie Mae and Freddie Mac alone.
“We have our problems, but when we have them, we shine a light on them and move quickly to clean them up,” Paulson said. “I can’t think of any other nation that does that.”
Paulson appeared on “Meet the Press,” from China where he was on a family vacation to watch the Olympics. He’s visited the country more than 70 times, both as a public and private citizen, and has taken an interest in China’s energy and environmental issues.
Brokaw brought up that 750,000 Chinese die annually from the effects of pollution, and that the problem is expected to get worse as the country builds coal power plants at a rate of one per week.
“The world can’t solve environmental issues without the engagement of China,” Paulson said.
Likewise, increasing dialog with China will encourage the country to pursue a path of reform by expanding freedoms, he said.
“Those that think we need to contain or counter China’s economic growth or we should be concerned that they are going to overtake us are worried about the wrong thing,” Paulson said. “The best thing that could happen to the United States would have China continue to grow, continue to progress and continue to reform. The worst thing is China to seriously stumble.”