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Stabilizing Financial System Top Priority, Paulson Says

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The Associated Press

Published: July 23, 2008

WASHINGTON - Treasury Secretary Henry Paulson spent another day stumping for the U.S. banking system, declaring Tuesday that his top priority was ensuring "stability and confidence in our markets and financial institutions."

However, those soothing words had to confront the reality of another massive loss by a big bank. Wachovia Corp., the nation's fourth-largest, reported that it had lost $8.86 billion in the second quarter due to soaring bad mortgage debt. It said it would slash its dividend and eliminate 10,750 positions out of a work force of roughly 120,000 employees.

Paulson, speaking to business executives in New York City, said the overall economy and the financial system were going through a "period of stress," which he said could last for months. He insisted that the U.S. economy would emerge from the troubles "stronger and better poised for robust growth."

Paulson said it was critical for Congress to move rapidly to approve a support package for mortgage giants Fannie Mae and Freddie Mac because of the important role the two institutions play in supporting almost half of the home mortgages in the country.

He said Congress' approval, which he predicted would come this week, would be "central to the speed with which we emerge from this housing correction" because it would guarantee the flow of mortgages to qualified buyers.

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