Paulson Sees Housing Market Bottom Within a “Number of Months”

The U.S. housing market could be on its way to recovery within the next year, according to statements Monday from Treasury Secretary Henry Paulson, but he left the door open for future federal bailouts of key industry players if necessary.

“I believe that there is a reasonable chance that the biggest part of that housing correction can be behind us in a number of months. I’m not saying two or three months, but in months as opposed to years,” Paulson said in a Washington D.C. press conference.

“I think we’re going to have housing issues … and mortgage issues for years, but in terms of getting by the biggest part of this correction, if we can make this Fannie Mae-Freddie Mac effort work the way I would like to see it work, I think we’ll make real progress here,” he added in reference to the recent government takeover of the ailing mortgage giants.

Paulson called the housing correction the “root of the challenges”  for U.S. financial institutions and the economy as a whole, saying that until house prices stabilize and the mortgage market settles down, there will continue to be “turmoil in the financial markets.”

The government’s role, according to Paulson, in speeding up the correction is to make sure plenty of mortgage funding is available.  Several months before bailing out Freddie and Fannie, the federal government stepped in to keep a private sector company, Bear Stearns from going under.  Yet as major investment bank Lehman Brothers filed for bankruptcy Monday, the Feds maintained a hands-off policy, preferring instead to simply orchestrate a meeting of potential buyers to save the failed company.

When asked by reporters if the well of government bailout money had dried up for good, Paulson did not rule out the possibility of more intervention.  His stated that his primary concern was to “maintain the stability and orderliness of our financial system,” but added that “we do not take, and I don’t take, lightly ever putting the taxpayer on the line to support an institution.”

The Treasury Secretary urged consumers and investors to stay positive while “[we work] through a difficult period in our financial markets right now as we work off some of the past excesses,” and Paulson concluded that overall “the American people can remain confident in the soundness and the resilience of our financial system.”




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