Paulson Says His Time is Short, Unlike US Economic Woes

Shouts of joy burst from Beijing over the Men's 4x100m freestyle relay. An American team that shattered a world record and gathered silent strength at the inspiration of boastful French team predictions. A reflection of American glory played out on the remarkable Olympic stage created by the Chinese. However, not all news from Beijing reflects American achievement.

Treasury Secretary Henry Paulson, in his Sunday "Meet the Press" appearance from Beijing, told moderator Tom Brokaw he thought that the challenges in the US housing markets would persist beyond this year. Paulson's comments reflected his belief that these challenges are at the core of current and emerging economic problems. Yet, nearly in the same breath he announced he would not be staying on as Treasury Secretary beyond the Presidency of George W. Bush.

Paulson offered few solutions or roadmaps, but did take some obvious immediate moves off the table. Paulson assured Brokaw that he did not intend to leverage newly issued authority to inject capital into Fannie Mae and Freddie Mac. Meanwhile, in separate statements by Daniel Mudd, Fannie Mae's chief executive, Mudd projected Fannie Mae's capital reserves to be wiped out by 2009 and would require it to raise additional funds.

This being said, stabilizing investor confidence in the publicly traded Government Sponsored Entities (GSE) is going to be critical to thwarting a full scale taxpayer-backed bailout. Part of that confidence campaign is be waged by Paulson in his role as an adviser in the US-China economic dialog. A role that is critical in maintaining confidence in China, a $400 billion investor, in Fannie Mae and Freddie Mac.