Posted without comment, except for: until March of this year Paulson is pretty much clueless about the broader ramifications of the housing bubble bursting. Until then, in fact, he is engaged in efforts to keep the bubble from deflating, including the use of the GSEs (Fannie and Freddy). If I was a combination Stalinist-conspiricist, I would suspect the further injection of liqudity into housing, which supported the much larger sh*tpile of mortgage-backed securities and the like, was preparation for selling this crap to the taxpayers. It is certainly working out that way.

August 1, 2006: Paulson inaugural speech has no mention of mortgages or financial markets.

November 20, 2006: Our capital markets are the deepest, most efficient, and most transparent in the world. We are the world's leader and innovator in mergers and acquisitions advice, venture capital, private equity, hedge funds, derivatives, securitization skills, and Exchange Traded Funds. This expertise has made our leading financial institutions, many of them headquartered right here in New York, leaders in Asia, Europe, and Latin America. U.S. commercial and investment banks contribute greatly to economic success all around the globe. . . . While no nation's regulatory structure is perfect, ours has served us very well for many years. It is second to none. And to ensure that it meets the challenges of the years ahead, we should be open to learning from our own experience and from the experience of others. . . .

November 28, 2006: The United States and the UK have had well-developed, highly efficient markets for many years. And both serve as an example to the rest of the world. U.S. financial sector deregulation in the 1980s led to an explosion of new services and financial instruments, making the United States the world's leader and innovator in financial services, including mergers and acquisitions advice, securitization skills, derivatives, high-yield debt financing, and hedge funds.

December 11, 2006: Homeownership is a goal that unites Americans across racial, ethnic, and income lines. President Bush is particularly pleased that minority homeownership rates have increased in recent years, as overall homeownership levels have reached new heights. And throughout the Administration, we continue to look for ways to increase access to capital and financing, so that people who work hard and save can one day walk across the threshold of their very own home.

The value of mortgage products in the United States has grown significantly. As of September, outstanding mortgage debt totaled roughly $ 12.8 trillion - an increase of more than $5 trillion since the beginning of the decade. And today's mortgage-backed securities marketplace features substantial liquidity. The daily trading average of Agency Mortgage Backed Securities is nearly $244 billion, up from $38 billion a decade ago.

Fostering a robust mortgage lending industry and mortgage securities marketplace is an essential mission of the Treasury Department.

The housing sector makes significant contributions to our economy. Residential construction accounts for about five-and-a-half percent of GDP, or three-quarters of a $1 trillion in spending. And it directly accounts for about 3 percent of total employment in the U.S.

Activity in the housing sector helped to drive our recovery out of the recession of 2001. From 2003 to 2005, housing activity added about half a percentage point to overall GDP growth each quarter.

This year, activity in the sector has slowed down. But the overall health of our economy continues to be strong.

March 13, 2007: U.S. capital markets are the deepest, most efficient, and most transparent in the world. We are the world's leader and innovator in mergers and acquisitions advice, venture capital, private equity, hedge funds, derivatives, securitization skills, and Exchange Traded Funds. With this expertise, our major financial institutions have contributed greatly to economic success throughout the world.

September 20, 2007: As has been well documented, the current credit market reappraisal started in the subprime mortgage market. The performance of subprime mortgages deteriorated, as a result of higher than expected delinquencies and defaults. This introduced greater uncertainty regarding both the future prospects of subprime mortgage-backed securities and the methodologies the credit rating agencies used to rate these securities. These factors led investors fundamentally to reassess the risk of these securities and subsequently to reassess price. Compounding the challenge was the increased complexity and opacity of many of the mortgage backed securities investment strategies and instruments. The combination of uncertainty and complexity resulted in few investors willing to put capital at risk.

Given the interconnectedness of the various components of our capital markets, these concerns over subprime mortgages and related securities had an impact on investors' confidence and assumptions about the credit quality and value of other assets. Consistent with expectations, we have witnessed a reassessment of risk, and hence a subsequent revaluation across capital markets globally. Certain asset classes were able to reassess fairly quickly and investors have greater confidence in their fundamental assessments. In such markets, liquidity has returned and markets are operating in a more customary fashion.

October 16, 2007: The GSEs also have a role to play in making affordable mortgage products more widely available. It is their mission. The secondary market in GSE mortgage-backed securities is functioning well. The GSEs could increase the flow of mortgage capital to refinance subprime borrowers if they securitized a greater number of these mortgages. To accomplish this, the GSEs must work closely with their private mortgage insurance company partners in the development of new products. The GSEs have additional capacity to help more blemished-credit struggling homeowners and we are hopeful that they will step up to this challenge. . . . The reassessment of risk has played out more rapidly in some markets than in others. In certain asset classes, risk has been reassessed and repriced fairly quickly as investors gained confidence in their fundamental assessments. In such markets, liquidity has returned and markets are operating normally. Good examples would include world equity markets, sovereign debt markets, and investment grade corporate debt.

On the other hand, some sectors that are characterized by more complex securities or that rely more heavily on securitization and ratings -- such as the jumbo mortgage market, the leveraged loan market, and the asset backed commercial paper market -- are still operating under some stress with impaired liquidity. Conditions are better than they were a few weeks ago, and we continue to see improvements, but it will take longer for these sectors to fully recover. . . . Innovation is the hallmark of our capital markets and it brings with it significant benefits to individual investors and our overall economy. However, innovation often outpaces regulation. That is not surprising, and we would not want it the other way around. If it were, we would have less competitive and efficient markets, which would ultimately stifle economic growth. It would mean fewer jobs and lower wages.

December 3, 2007: As we are all aware, the housing and mortgage markets are working through a period of turmoil, as are other credit markets, as risk is being reassessed and re-priced. We expect that this turbulence will take some time to work through, and we expect some penalty on our short-term economic growth. The positive news is that we are confronting and managing these challenges against the backdrop of a strong global economy. And the U.S. economy remains fundamentally sound - core inflation is contained, continued job gains are providing a good foundation for household spending, corporate balance sheets remain healthy overall, and strong growth abroad is supporting U.S. exports.

December 17, 2007: We do expect that the housing market turbulence will take some time to work through, and that there will be some penalty on our short-term economic growth. Fortunately, the economic picture in Orlando is relatively strong: you have a healthy job market, with an unemployment rate over one percentage point below the national average.

Overall, the U.S. economy will continue to grow and is fundamentally sound. Core inflation is contained, continued job gains are providing a good foundation for household spending, corporate balance sheets remain healthy overall, and strong growth abroad is supporting U.S. exports. . . .

The government acted to prevent a market failure and to try to avoid unnecessary harm that would result from a cumbersome, difficult decision-making process due to a coming wave of struggling subprime borrowers. We developed a solution that involves no government funding or subsidies for industry or homeowners. . . .

December 18, 2007: We do expect that the housing market turbulence will take some time to work through, and that there will be some penalty on our short-term economic growth. Kansas City is facing these difficulties with a somewhat weaker economy than other parts of the country, with an unemployment rate about a point and a half above the national average.

Overall, the U.S. economy will continue to grow and is fundamentally sound. Core inflation is contained, continued job gains are providing a good foundation for household spending, corporate balance sheets remain healthy overall, and strong growth abroad is supporting U.S. exports.

December 18, 2007: We do expect that the housing market turbulence will take some time to work through, and that there will be some penalty on our short-term economic growth. Stockton is facing these difficulties with a somewhat weaker economy than other parts of the country, with an unemployment rate about five percentage points above the national average.

Overall, the U.S. economy will continue to grow and is fundamentally sound. Core inflation is contained, continued job gains are providing a good foundation for household spending, corporate balance sheets remain healthy overall, and strong growth abroad is supporting U.S. exports. . . .

January 7, 2008: After years of unsustainable price appreciation and lax lending practices, a housing correction was inevitable and necessary. That correction is underway. Over the next two years, we also face an unprecedented wave of 1.8 million subprime mortgage resets, raising the potential of a market failure. Because the industry does not have the capacity to manage this volume, without action, unnecessary foreclosures would result.

To meet this challenge, this Administration - without committing any taxpayer money - helped foster an industry-wide effort to prevent this market failure. By preventing avoidable foreclosures, we will safeguard neighborhoods and communities, and fulfill our primary responsibility of protecting the broader U.S. economy. However, let me be clear: there is no single or simple solution that will undo the excesses of the last few years. . . .

Fortunately, creditworthy borrowers looking for a conforming mortgage will find that Fannie Mae and Freddie Mac have remained active, and traditional conforming mortgage products are readily available. Fannie and Freddie's securitization volumes have risen dramatically since June of 2007, even as other mortgage markets slowed. However, they are also experiencing stress due to the housing downturn and both companies reported substantial third quarter losses. I am pleased that Fannie and Freddie have moved quickly to raise capital and, through their securitization activities, remain a positive force for home finance. . . .

For the last five months, markets have been comprehensively reassessing risk, resulting in the re-pricing of securities across a number of asset classes and sectors. This is appropriate and a healthy return to fundamentals. Given the global nature of our markets and the complexity of the instruments involved, it will take additional time to work through this period of stress and volatility.

As markets reassess, we should not be surprised or disappointed to see financial institutions writing down assets and strengthening balance sheets. This is market discipline in action and should enhance market confidence over time. One thing I have learned over my career is that if a financial institution needs capital, it should move quickly to raise it. Moving to strengthen balance sheets better prepares financial institutions to exploit new opportunities and confront inevitable challenges.

As Treasury Secretary, I continue to firmly believe in the value of this approach; it is a positive for financial institutions, capital markets and our economy. Our financial institutions entered this period well-capitalized, and we expect them to remain so. . . .

I have great confidence in our markets. They have weathered similar stressful periods in the past - whether it was the Savings & Loan crisis, Latin American and Asian market turbulence or the tech bubble of the late 1990s. The private and public sectors responded and worked through these difficult periods. Markets recovered then, and they will again. . . .

January 30, 2008: Last fall, we encouraged the creation of the HOPE NOW alliance, a coalition representing over 90 percent of the subprime servicing market and non-profit mortgage counseling organizations, trade associations and investors. This industry-wide effort employs multiple tools to reach and help struggling homeowners, including streamlining subprime borrowers into refinancings and loan modifications to avoid a market failure. And they are doing so without asking American taxpayers to pay the bill.

There are promising developments. . . .

February 14, 2008: The U.S. economy is fundamentally strong, diverse and resilient, yet after years of unsustainable home price appreciation, our economy is undergoing a significant and necessary housing correction. The housing correction, high energy prices and capital market turmoil are weighing on current economic growth. I believe that our economy will continue to grow, although its pace in coming quarters will be slower than what we have seen in recent years. . . .

Treasury continues to monitor capital markets closely and to advocate strong market discipline and robust risk management. While we are in a difficult transition period as markets reassess and re-price risk, I have confidence in our markets. They have recovered from stressful periods in the past, and they will do so again. . . .

February 28, 2008: While I expect the economy to continue to grow this year, the housing correction continues to pose the biggest downside risk. And we at Treasury are focused on the housing and mortgage markets.

Let's put this in perspective: 93% of mortgages are paid on time. Less than 2% are in foreclosure.

So while some in Washington are proposing big interventions, most of the proposals I've seen would do more harm than good. I'm not interested in bailing out investors, lenders and speculators. I'm focused on solutions targeted at struggling homeowners who want to keep their homes. . . .

March 19, 2008: Fannie Mae and Freddie Mac are significant participants in the mortgage market and I am encouraged that today's announcement will make more financing available in this area. Additional capital will enable the companies to help more homeowners and will strengthen the underlying fundamentals of the mortgage market.

Today's announcement also reaffirms the commitment of all parties to work toward comprehensive GSE reform legislation as soon as possible. I look forward to working with Director Lockhart, Congress and the GSEs on this important legislation.

March 26, 2008: For some months now, reduced access to short term funding and liquidity issues have created turmoil in our capital markets. In the midst of these conditions, Bear Stearns found itself facing bankruptcy. The Federal Reserve acted promptly to resolve the Bear Stearns situation and avoid a disorderly wind-down. It is the job of regulators to come together to address times such as this; and we did so. Our focus was the stability and orderliness of our financial markets. . . .

Despite the fundamental changes in our financial system, it would be premature to jump to the conclusion that all broker-dealers or other potentially important financial firms in our system today should have permanent access to the Fed's liquidity facility. Recent market conditions are an exception from the norm. At this time, the Federal Reserve's recent action should be viewed as a precedent only for unusual periods of turmoil. . . .