Paulson Defends Economy Bailout Efforts

Asked to place the economy's health on a scale from one to ten, Paulson sidestepped, saying efforts to avert a collapse are near a ten, but warned that it will take much longer for the economy to recover. The Treasury secretary predicted further drops in housing prices and continued stress in the capital markets in the coming months.

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Speaking on the panel alongside Paulson, former Treasury Secretary Robert Rubin, who served under President Clinton, predicted that the crisis would recede within a "reasonable period of time," though he said it would last at least another year. Rubin said that the financial system was in better shape now than before the Bush administration took action over the last couple months.

Auto Industry Bailout?

When asked if the government needs to bail out the troubled U.S. auto industry, Paulson, who revealed that he drove a Toyota Prius hybrid car, held his position that it would be a "huge mistake" to just give the car companies loans as has been proposed by congressional Democrats. Paulson maintained that the auto industry is "important" but needed to reform itself in order to achieve "sustainability" and "viability."

As Congress considers whether to pursue a second stimulus package either during this administration or the next, the three panelists, which also included former Treasury Secretary Lawrence Summers, differed on what a package should look like and its possible effect.

Paulson, reiterating the Bush administration's policy, argued that a continued focus on the capital and credit markets would be most effective.

Rubin, echoing calls from Democrats on Capitol Hill, favored another round of stimulus, but said it should be coupled with an unspecified multiyear program to continue building the economy once it is healthy.

Summers, who is rumored to return to the helm of the Treasury Department in the Obama administration, but stressed that he was commenting strictly in his personal capacity, had previously pushed for a stimulus that was "timely, targeted, and temporary."