Paulson Wants Stronger Oversight of Mortgage Industry

The mess threatens to plunge the country into its first recession since 2001.

The president's working group on financial markets was formed after the 1987 stock market crash to monitor markets. It includes Federal Reserve Chairman Ben Bernanke and the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission.

More recently, the group has been looking into the causes of the current credit crisis and searching for ways to prevent a recurrence.

In a speech to the National Press Club, Paulson said: "This effort is not about finding excuses and scapegoats. Those who committed fraud or wrongdoing have contributed to the current problems; authorities need to, and are prosecuting them. But poor judgment and poor market practices led to mistakes by all participants," he added.

The next step, Paulson said, is to push for implementation of the recommendations. He said the working group will continue to assess the situation and consider whether further steps are needed.

Fielding questions after his speech, Paulson repeated comments that a strong U.S. dollar is "in our nation's interest," a position long stated by past U.S. treasury secretaries. The dollar has been falling sharply against other currencies, such as the euro. That is helping sales of U.S. exports to foreign buyers because it makes U.S. goods less expensive. But the drooping dollar also is increasing inflation pressures.

The working group also recommended that credit-rating agencies differentiate between ratings on complex investment products and conventional bonds, Paulson said. The ratings agencies also should disclose conflicts of interest, he said.

The group also called on issuers of mortgage-backed securities to provide more information about their products(AP) -- , Paulson said. The group urged investors to conduct more independent analysis of investments and be less reliant on ratings agencies, he said.

"There is no single, simple solution to the problems that have emerged ... yet we have determined that market participants' behavior must change," Paulson added.