Paulson, Thain: Credit Crunch Is Easing
Treasury Secretary Henry Paulson and Merrill Lynch CEO John Thain each said in interviews published Wednesday that they see signs the credit crunch easing.
Paulson, in an interview with
The Wall Street Journal
, said the "worst is likely to be behind us" and Thain, in a visit to Merrill's India operations, said he sees banks' losses tied to mortgages growing smaller in the coming quarters, according to
Reuters
.
Both
Goldman Sachs
(GS) - Get Report
alums tempered their optimism. Paulson said it would take several months more to sort out the full effects of the credit markets' disruptions that began last summer and further "bumps along the road" remain, the
Journal
said.
And Thain said banks with heavy exposure to U.S. consumers could take another hit as the economy deals with falling home prices, rising food and energy prices and higher unemployment over the next six months to a year, according to
Reuters
.
But Paulson pointed to actions by the
Federal Reserve
-- including the central bank's aid to
JPMorgan Chase
(JPM) - Get Report
in buying a near-bankrupt
Bear Stearns
(BSC)
in March and unprecedented actions to provide liquidity to commercial and investment banks -- as soothing to the markets, the
Journal
said.
On the political front, Paulson urged Congress to approve legislation improving the regulation of government-sponsored mortgage lenders
Fannie Mae
(FNM)
and
Freddie Mac
(FRE)
, the
Journal
reported.
That comes as the White House signaled it would veto a bill sponsored by Democrats that would provide Federal Housing Administration insurance for $300 billion in troubled mortgages.
Also on Tuesday, Treasury met with about 10 lenders, including
Countrywide Financial
(CFC)
,
Bank of America
(BAC) - Get Report
and
Citigroup
(C) - Get Report
to urge them to standardize voluntary procedures for helping qualified borrowers modify existing mortgages into more affordable terms.
This article was written by a staff member of TheStreet.com.