WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson said on Wednesday he would work to ensure a smooth transition to his successor after the November presidential election, throwing cold water on hopes that he might stay on crisis control duty.
In an interview on CNBC, Paulson said he was available after the election between Sens. John McCain and Barack Obama to work with "whoever the new treasury secretary is."
"This is going to be a first-rate transition," he added. Some on Wall Street have expressed concern about Paulson leaving in the midst of a credit crisis. Paulson has previously said that he does not intend to stay on as treasury secretary beyond January, when a new administration takes office.
Paulson said the 14-month global credit crisis had taken a heavy toll on the economy, and that was apparent in Wednesday's U.S. retail sales figures. The Commerce Department reported that September sales fell 1.2 percent, the biggest drop in more than three years. That heightened recession worries and contributed to a massive Wall Street sell-off
. Paulson called the sales figures disappointing but "not surprising," and defended the administration's efforts to stem the financial market turmoil. Paulson announced on Tuesday that the government was investing in nine major banks, in the first installment of a $700 billion financial rescue package that was approved earlier this month.
He insisted that the nine banks receiving $125 billion in government cash infusions would put the money to use to help the economy. As banks become more confident and money begins flowing through credit channels, lending will pick up and that will boost the economy, he said. "They're not going to be paying down their own debt.
The regulators understand that and they (the banks) understand that," Paulson said when asked what was to stop firms from simply using the government's money to pay off high-interest loans rather than lending to companies and consumers. The bailout plan was initially pitched to Congress as a fund to buy up bad debts that were weighing down banks' balance sheets and restricting their lending not just to customers but also to each other. That lending freeze has driven up borrowing costs, and the economy has suffered.
Paulson said he still intended to use a portion of the money to buy illiquid assets, but said it was essential to stabilize financial markets first.
Source: http://www.reuters.com/article/vcCandidateFeed