Treasury, Urged to Act, Finds Few Tools
As financial markets went haywire this month, Wall Street looked to one of its own, Treasury Secretary Henry M. Paulson Jr., for help.</br></br>Paulson, who was chairman of the investment bank Goldman Sachs before joining the Bush administration, has acknowledged that the downturn in the markets could damage the U.S. economy. But the Treasury Department under Paulson has made no dramatic public moves to shore up frozen markets for home mortgages and other debt.</br></br>Yesterday, Paulson and Federal Reserve Chairman Ben S. Bernanke met with Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) as the debate over the government's response to the breakdown of markets for mortgage and other debt moved to Capitol Hill.</br></br>Dodd, in a news conference after the private meeting, called on Paulson and Bernanke to "use all the tools at their disposal" to ease the problems. Most of the policy changes Dodd suggested would do little to affect frozen credit markets in the near term, economists said, but rather might help prevent a similar event.</br></br>The reality is that, for Paulson and the Treasury Department, there are relatively few tools that would allow this or any administration to manage the ups and downs of financial markets, according to economists and economic policymakers of both parties.