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CNBC Exclusive: Paulson Downplays Selloff, Says U.S. Economy Healthy

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In an exclusive appearance on CNBC's Kudlow & Co., Treasury Secretary Henry Paulson said troubles hitting the subprime lending industry "shouldn't be a surprise to anyone," adding that he doesn't expect industry fallout to cause a credit crunch for consumers.

"There are going to be dislocations; it's painful to some mortgage holders and some lenders, but it's largely contained," he said.

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Secretary Henry Paulson

"The consumer in this country continues to be very healthy," Paulson said. "This is a diverse economy and we've got a very, very healthy consumer, and inflation would appear to be contained."

Paulson said he thinks the troubled housing market has bottomed out, but he expects evidence of a rebound to appear in the spring.

"Housing was growing at an unsustainable level," Paulson said. "It's too early to tell whether it has bottomed, I believe it has. We'll know more in the next month or two."

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Secretary Henry Paulson Pt. 2

The Treasury Secretary downplayed the significance of Tuesday's sharp selloff in the stock market.

"I focus on the economy and fundamentals, I think that's what drives the market," said Paulson, "I continue to believe the U.S. economy is healthy."