Paulson: Using all tools
Treasury secretary sees strain ahead, but says government will employ 'all' resources to boost financial system.
NEW YORK (CNNMoney.com) -- Treasury Secretary Henry Paulson said Wednesday that financial markets continue to be "strained" but he urged "patience" and said the federal government will use all tools necessary to ensure stability in the financial system.
"We will coordinate the use of our existing and new authorities to restore market confidence by strengthening financial institutions, preventing systemic bank failures, increasing liquidity to financial markets and keeping mortgage credit available and affordable," Paulson said.
He added: "Every effort will require careful analysis, deliberation and transparency, and some measure of patience from the American people as we create the most effective process possible."
Paulson noted that it will likely be several weeks before the Treasury starts fully operating a program to buy troubled mortgage assets as it is authorized to do by the $700 billion bailout enacted last Friday.
He said that the program - intended to restore stability to the financial system - won't save every bank from going under. "One thing we must recognize ... some financial institutions will fail. The [program] doesn't exist to save every financial institution for its own sake.
In addition, Paulson said he would discuss with his counterparts in G7 countries what more can be done collectively to stabilize the financial system, and that he will be calling for a meeting of the G20, which includes countries with emerging economies.
Central bankers and finance ministers from the G7 countries - Canada, France, Germany, Italy, Japan, the United Kingdom and the United States - are meeting in Washington, D.C., this weekend. Russia will also be in attendance.
While there will be times where close coordination is necessary, Paulson said, that doesn't mean every country is going to operate in lock-step with one another since each nation has different systems and might benefit from different solutions. "It would not make sense to have identical policies," he said.
On Wednesday morning, the Federal Reserve, working in coordination with other central banks worldwide, enacted an emergency interest rate cut. The Fed lowered its fed funds rate by a half percentage point to 1.5%.
The rate cuts are the latest in a series of groundbreaking moves by the world's top central banks to try to breathe life into embattled financial markets.
Earlier in the week, the Fed took steps that could potentially make trillions of dollars available to banks and the nation's leading businesses. That's on top of the controversial $700 billion Wall Street bailout approved by Congress last week.