Treasury Secretary refuses actions to strengthen dollar

Nick Langewis and David Edwards
Raw Story
Monday, March 17, 2008

Fox News' Chris Wallace assails Treasury Secretary Henry Paulson on this morning's Fox News Sunday about the implications behind the federal bailout of troubled investment firm Bear Stearns.

"We've got strong financial institutions," insists Paulson. "Our markets are the envy of the world. They're resilient, they're...innovative, they're flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong."

On being asked if the government will step in to bail out any additional firms, Paulson refuses to "speculate" on what "might happen," but insists: "Our focus, our priority... No. 1 priority, is the stability of our financial systems."

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"What we're working to do," he continues, "is to minimize the impact of what's going on in housing, what's going on in the capital markets, on the real economy."

"But," pushes Wallace, "isn't the result of this that U.S. taxpayers might end up holding billions of dollars in bad mortgage securities?"

"I'm not going to speculate about the outcome of this specific situation," reiterates Paulson. "You're going to have to wait and see. Conversations are going on--over the weekend--I'm very involved in those conversations."

"I'm confident that this was the right thing to do," he continues. "Sometimes there are difficult decisions; this, in my judgment, was not a difficult decision. It was a right decision. And, again, our markets are very important."

"Why should the government," asks Wallace, "and thereby, U.S. taxpayers, bail out lenders and borrowers who made bad decisions; and, if they know they're going to be bailed out, what does that do to the 'moral hazard' argument that they don't end up paying a price?"

Paulson insists he understands the "moral hazard" argument, and tells Wallace he is jumping to conclusions when it comes to the taxpayer cost of the Bear Stearns bailout, and to "wait and see." Paulson further defends protecting the "capital markets," and thereby, he says, the economy.

"Why not," asks Wallace of the plunging U.S. dollar, "take a more aggressive stance and support a stronger and stable dollar, and even implement policies to--prop up the dollar?"

"A strong dollar is in our nation's interest," responds Paulson. "Our long-term fundamentals in this country--economic fundamentals--are strong. Our economy has its ups and downs like any other economy, but I believe that that long-term strength is going to be in the dollar."

Paulson touts "pro-growth tax" and openness to free trade (including a pending free trade agreement with Colombia).

He concludes: "Anything we can do to enhance confidence in our marketplace; in our capital markets; in our economy; are--the policies that increase confidence in our economy over time."

More of the interview appears below, as broadcast on Fox News' Fox News Sunday on March 16, 2008.

Full article here.

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