Paulson sees more bad news ahead
But the Treasury Secretary tells Fortune's Nina Easton that the economy is strong enough to withstand the volatility.
FORTUNE Magazine
By Nina Easton, Fortune Washington bureau chief
August 16 2007: 2:04 PM EDT
WASHINGTON (Fortune) -- Treasury Secretary Hank Paulson predicts that the "current strained situation" in the markets "will take time to play out, and more difficult news will come to light. Some investors will take losses, some organizations will fail," he says in remarks that will appear in the forthcoming issue of Fortune.
But, he stresses, global economic fundamentals remain healthy, providing a solid base for financial markets to continue to adjust. "The overall economy and the market are healthy enough to absorb all this," he notes.
This is the kind of carefully calibrated observation that has become the hallmark of Paulson's public remarks during a volatile summer. How to acknowledge bad news without feeding it is at the crux of a communications dilemma for the Bush administration.
Paulson: Market turmoil to slow U.S. growth
It's not an easy balance. Attempting to cheerlead a squirrely market is a dangerous enterprise, akin to "catching a falling knife" says former White House economics adviser Lawrence B. Lindsey, because "you risk looking impotent" if the market continues to fall. But saying nothing can carry its own risks, too, if the markets interpret that invisibility as a sign of no-confidence.
And what administration officials say publicly can have almost as much impact on markets as what the Federal Reserve Board decides behind closed doors. That's a lesson that Treasury Secretaries sometimes learn the hard way.
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http://money.cnn.com/2007/08/16/magazines/fortune/easton_paulson.fortune/index.htm?postversion=2007081611