The White House will "do what it takes" to stabilize chaotic markets and minimize the economic damage, Treasury Secretary Henry Paulson said Sunday.
All eyes now are on Wall Street as leading financial advisers prepared for a Monday meeting with President George W. Bush and the Federal Reserve weighs another deep interest rate cut Tuesday to stem even more deterioration.
Paulson, in a series of news show appearances, defended the Federal Reserve's extraordinary step Friday to provide emergency financing to one of Wall Street's most venerable firms, Bear Stearns Cos. The central bank's intervention was "the right decision," he said.
The treasury chief sidestepped questions about what would have happened if the Fed had not ridden to the rescue, whether other firms are on shaky ground and the possibility of additional bailouts similar to Bear Stearns'.
At the same time, however, Paulson sought to send a calming message that the administration is on top of the turbulent situation. "The government is prepared to do what it takes to maintain the stability of our financial system," he said. "That's our priority."
Bush planned to meet on Monday with his advisory panel on financial markets, whose members include Paulson and Fed Chairman Ben Bernanke. The panel on Thursday recommended stricter regulation of mortgage lenders as part of a broad effort to prevent a repeat of a credit crisis threatening to drive the U.S. into the first recession since 2001.
Economists increasingly believe the spreading fallout from a severe credit crisis has pushed the United States into recession. The situation has led to record-high home foreclosures, forced financial companies to take multibillion losses from bad mortgage-linked investments and rocked Wall Street.
"No one is debating the fact that this economy has slowed way down," Paulson said. "We feel it, we know it, the American people know it."