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

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.

"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."

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."