Paulson: Government Won't Buy Bad Assets

A proposal to have part of the bailout funds used to guarantee mortgages that have been reworked to reduce monthly payments for borrowers is an approach the administration continues to discuss, but Paulson did not announce that it would be adopted. Federal Deposit Insurance Corp. Chairman Sheila Bair has pushed for that approach.

Speaking of the first-ever summit of leaders of the Group of 20 major industrial and developing countries, Paulson said this weekend's meeting needs to focus first on how to repair the financial system as a way to bolster the global economy.

Paulson praised a new set of guidelines issued Wednesday by the Federal Reserve and other bank regulators, saying that they addressed a crucial issue of making sure that banks continue to lend at adequate levels.