Suzy Jagger – “Henry Paulson says banks are safe and sound”

http://business.timesonline.co.uk/tol/business/markets/united_states/article4368749.ece

Henry Paulson says banks are safe and sound

Suzy Jagger | July 21, 2008

Henry Paulson, the US Treasury Secretary, sought to reassure Americans yesterday that the banking system was “safe and sound”, but he said that the crisis facing lenders would take months to fix.

Mr Paulson said in a television interview: “I think it’s going to be months that we’re working our way through this period, clearly months. Of course the list [of difficulties] is going to grow longer given the stresses we have in the marketplace, given the housing correction – but again, it’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”

After the collapse of IndyMac this month, the fifth American bank to fail, Mr Paulson said that all savings of up to $100,000 (£50,000) were insured by the US Government.

His comments came on the eve of new rules being introduced today governing the short-selling of shares – effectively, a bet that a share price will fall. The Securities and Exchange Commission (SEC) will introduce new regulations to limit short-selling of 19 financial stocks including Fannie Mae and Freddie Mac, the mortgage backers.

Last Sunday, the Treasury and the Federal Reserve unveiled a rescue plan to shore up confidence in Fannie Mae and Freddie Mac, both of which own or guarantee almost $5 trillion of mortgage debt – or about half of all American mortgages.

Separately, this week is critical for Wall Street as important company results flow in. While investors have already seen the performance of half of the leading banks – JPMorgan Chase, Merrill Lynch and Citigroup all reported last week – Bank of America, the second-biggest bank in the United States, and Wachovia, the regional bank, publish their results over the next few days.

At the same time, Apple, Yahoo!, AT&T and Pfizer will publish their quarterly earnings, offering a view of the US corporate economy’s health.

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Published in: on July 22, 2008 at 10:26 PM  Leave a Comment  

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