(AP Photo/Nam Y. Huh)
WASHINGTON (AP) -- Global financial markets remain severely strained, underscoring the need for quick action to implement the government's $700 billion rescue program, Treasury Secretary Henry Paulson said Wednesday.
Paulson said the financial market turmoil has hurt the economy, but he said the administration is moving quickly to begin the largest financial system rescue effort in history.
He said even with the program to buy bad assets from financial institutions, some banks will fail. He also called for patience saying "the turmoil will not end quickly and significant challenges remain ahead."
In an attempt to help stop the financial crisis from causing a global economic recession, the Federal Reserve and other central banks cut interest rates in a rare coordinated move Wednesday.
Paulson called the coordinated rate cuts "a welcome sign that central banks around the world are prepared to take the necessary steps to support the global economy during this difficult time."
Paulson on Monday selected Neel Kashkari, 35, an assistant Treasury secretary, to be the interim head of the new program. In his remarks Wednesday, Paulson said the administration would move quickly to nominate someone to fill the job permanently. The post requires Senate confirmation.
Paulson said he was consulting with President Bush, congressional leaders and presidential candidates Sens. Barack Obama and John McCain before choosing someone to fill the job permanently. He said he would work with the Senate on the choice when lawmakers return in November.
The administration has been rushing to implement the program which cleared Congress last Friday.
"Getting it right is as important as getting it done quickly," Paulson told reporters at a Treasury briefing. He said it would be several weeks before the program makes its first purchases of troubled assets.
"U.S. and global financial markets continue to be severely strained," Paulson said at the briefing called to preview the upcoming weekend meetings of finance officials of the Group of Seven major industrial countries and the 185-nation International Monetary Fund and the World Bank. The global credit crisis was expected to be the major agenda item at those talks.
Asked by reporters whether he thought it might have been a mistake to allow investment bank Lehman Brothers to fail last month, forcing the biggest bankruptcy filing in U.S. history, Paulson said he and other government authorities had no choice.
"Looking back, we have taken the right moves," Paulson said. "There was no buyer for Lehman Brothers."
Besides Kashkari, Paulson said he had also selected other interim leaders for the program including an interim chief financial officer.
On Monday, the department also issued guidelines to govern the purchase of bad assets and guard against conflicts of interest. It also asked for applications from private management firms who would like contracts to help run the program. Those applications were due by 5 p.m. EDT on Wednesday and there was an expectation that some firms could be selected by the end of this week.
Paulson said the program's oversight board held its first meeting on Tuesday and he pledged that there would be transparency in all aspects of the program.
"Addressing these challenges requires the dramatic steps we are taking here in the United States and it requires strong international partnerships," Paulson said.
He said he was seeking a special meeting of the Group of 20 countries, which includes the world's richest industrial countries and major developing countries, to discuss with top market regulators ways to deal with the global credit crisis. The meeting is expected to take place on Saturday in Washington.