Paulson says credit crisis may be fading
WASHINGTON (AP) - May 7, 2008 In an interview with The Associated Press, Paulson said that the
turmoil that has gripped Wall Street and took a turn for the worse
again in March has eased somewhat. "There's progress," he said.
"I think we're closer to the end of this than the beginning."
A prolonged housing slump, a severe credit crisis and soaring
energy costs have pushed the economy to the edge of a recession. To
help cushion the blow, the Bush administration and Congress
speedily enacted a $168 billion stimulus package of tax rebates for
people and tax breaks for businesses.
With oil surging to record levels above $123 per barrel and
gasoline prices hovering around all-time highs of $3.62 per gallon,
Paulson acknowledged that the high price people are paying at the
pump would diminish the impact of the stimulus payments that are
designed to give the economy a jump-start.
"Obviously, the high price of gasoline is unwelcome and is a
challenge and is a headwind," he said.
The first batch of rebate payments started hitting bank accounts
last week through direct deposits. Paulson, Vice President Dick
Cheney and other Bush administration officials head to government
check printing centers around the country on Thursday for events
highlighting the fact that millions of rebate checks are going in
the mail.
"We will get some help from the stimulus," Paulson said in the
interview. "Later this year, I expect growth will pick up."
Still, he acknowledged that the country was facing "tough times"
as people struggle with soaring gasoline prices, higher medical
costs and a weak jobs market.
Paulson said the steep slump in housing, which has depressed
home sales and prices, remained "the biggest risk to the
economy." But he said he believed that the steep turmoil that
began last August in credit markets has calmed since mid-March when
the crisis claimed its largest victim with the forced-sale of Bear
Stearns, the nation's fifth largest investment firm, to JP Morgan
Chase & Co.
But even though the markets are "somewhat calmer now," Paulson
said large portions of the credit markets - ranging from mortgages
to student loans to loans that banks make to each other - still are
not functioning in a normal way. While he said progress was being
made, "I wouldn't be surprised at all to see more bumps in the
road."