Paulson: Downturn Won't Provoke Recession

Economy tough enough to take market turmoil
By Sam Gale Rosen,  Newser Staff
Posted Aug 16, 2007 10:51 AM CDT
U.S. Treasury Secretary Henry Paulson reacts during the talk with China's Vice-Premier Wu Yi, not in photo, at Zhongnanhai, Beijing, China, Tuesday, July 31, 2007. Paulson met Tuesday with Chinese officials...   (Associated Press)
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(Newser) – The current turmoil in the financial markets will take its toll on the economy, but  won't cause a recession, Treasury Secretary Henry Paulson tells the Wall Street Journal in his first interview since the downturn began. Paulson says the crisis comes in the context of a very strong global economy—the strongest he's seen in his 32-year Wall Street career, he says—and that should insure continuing, if slowed, growth.

What's more, Paulson says, players damaged by being too heavily invested in risky mortgage securities shouldn't be insulated against losses: "One of the natural consequences of the excesses is that some entities will cease to exist." He says that the current credit crunch, which he calls "reassessment or repricing of risk," shouldn't surprise anyone, and might even be a helpful corrective.