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Rough Seas Seen Ahead For Financial Markets

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By MARTIN CRUTSINGER, The Associated Press

Published: September 13, 2007

WASHINGTON - Treasury Secretary Henry Paulson said Wednesday that the turbulence in financial markets will take some time to be resolved, especially in the area of subprime mortgages.

Paulson, speaking to officials of some of the country's biggest financial firms, said the Bush administration is looking for their help in making sure subprime homeowners get assistance in dealing with sharply rising mortgage payments as their initial low adjustable rate loans reset to higher levels.

'We have been experiencing market turbulence and as I have said for awhile, it is going to take some time to work its way out,' Paulson told finance officials at a meeting at the Treasury Department. 'We are going to work our way through this, in some markets more quickly than others.'

Paulson said that 'we are already seeing signs of improvements in a number of markets that have been experiencing stress.'

But he said it was going to 'take longer to work through the problems in the subprime market,' noting that there are a number of loans in this market scheduled to reset at sharply higher rates during the next two years.

Estimates are that 2 million homeowners will face steep increases in their mortgage payments during the next two years, putting many at risk of losing their homes. The session Wednesday was called as a follow-up to efforts announced by President Bush on Aug. 31 to provide more government help to borrowers struggling to cope with the higher mortgage payments.

Among those attending the meeting with Paulson was Angelo Mozilo, chairman of mortgage giant Countrywide Financial, which announced last week that it is facing the prospect of having to lay off 20 percent of its work force as it struggles with rising loan defaults.

Other companies represented were Wells Fargo & Co., CitiMortgage and JP Morgan Chase.

Wall Street has been on a roller-coaster ride during the past several weeks as investors have worried about mounting loan losses that began in the market for subprime loans - mortgages made to people with weak credit histories - but that now have spread to other types of credit.

The financial market turmoil has triggered steep declines in stock prices and prompted the Federal Reserve to signal that it stood ready to cut interest rates if necessary to keep the unfolding credit crunch from the country into a full-blown recession.

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