Treasury's Paulson: Lending 'Excesses' Have Markets Reassessing Risk
U.S. Treasury Secretary Henry Paulson says investors are reassessing a shifting risk environment, which has led to market adjustments following lending "excesses."
Paulson made the comments on CNBC's White House Summit, where the Bush Administration made its top economic team members available. Along with Paulson, participants included Commerce Secretary Carlos Gutierrez, Office of Management and Budget Director Rob Portman and Council of Economic Advisors Chairman Edward Lazear.
"What we're seeing is risk being re-priced and a different perspective on risk, which I think is healthy," Paulson told CNBC's Dylan Ratigan. "What I've said is that during times of benign, strong economic conditions, we can see excesses...come into our system. I think we had a wake up call."
Paulson reiterated previous statements that he sees "subprime risk as largely contained" and that he is "very much for a strong dollar," noting that strong growth outside of the U.S. has driven the dollar lower.
Earlier today the government reported that the U.S. economy grew at a 3.4 percent annual pace in the second quarter, the strongest showing in more than a year.
Paulson says a strong global economy is supporting U.S. economic growth.
"This is the strongest global economy I've seen in 32 years," Paulson said. "The growth in Europe has doubled, we've got growth through Asia, Japan is now growing. So I think this is being driven by strong growth outside of the U.S."
OMB Director Portman said spending restraint and a falling federal budget deficit is reflected in the latest GDP figures. Commerce Secretary Gutierrez called the economy "resilient and fast moving." Council of Economic Advisors Chairman Lazear said, "We've seen strong jobs growth and wage growth, which is very important for the average American."