Paulson’s Fantasy: U.S. Credit-Market Crisis Is “Closer to the End”


Peter Cook and John Brinsley
Bloomberg
May 1, 2008

May 1 (Bloomberg) — Treasury Secretary Henry Paulson said the credit crisis, now in its ninth month, probably is more than half over, and retained his forecast for the U.S. economy to keep growing.

“We are closer to the end of this problem than we are to the beginning,” Paulson said in a Bloomberg Television interview yesterday in Washington. Even with “headwinds and despite some of the things that we’re going through, this economy is still growing, albeit modestly,” he said.

Paulson, a former chief executive officer of Goldman Sachs Group Inc., joins the heads of Wall Street firms including JPMorgan Chase & Co. and Lehman Brothers Inc. in viewing the credit turmoil as nearer an end. He also said he’s focusing on existing efforts to address the housing slump, playing down a proposal for the department to use government funds.

The Treasury chief said a government report yesterday showing the economy grew 0.6 percent in the first three months of the year hadn’t altered his assessment.

The figures on U.S. gross domestic product indicated that only an increase in stockpiles of unsold goods prevented a contraction last quarter.

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