December 11, 2006
HP-193
Remarks of Treasury Secretary Henry M. Paulson
Before the Office of Thrift Supervision National Housing
Forum
Washington, DC -Good morning. Thanks, John, for your introduction, and thanks to you and your team for hosting today's forum. One of the things which I quickly learned after coming to Washington is that we really have a first-rate team in the Department – throughout all our bureaus. And it is gratifying for me to see some of the outstanding work being accomplished by the Treasury Department.
I have with me today two members of our Domestic Finance team. Some of you may know them already. Bob Steel is the Undersecretary for Domestic Finance and Emil Henry is Assistant Secretary for Financial Institutions. Bob and Emil have a wealth of experience in the world of finance and they will be involved in some of the key discussions relating to the housing industry.
At Treasury, we are charged with keeping America on the path of long-term sustainable growth. And increasingly that task requires a global outlook. Tomorrow I will head to China to participate in the first meeting of our Strategic Economic Dialogue. Several Cabinet Secretaries and agency heads will be in the delegation. And we'll be joined by Ben Bernanke of the Fed.
The Strategic Economic Dialogue is a forum for discussing China's successful integration into the global economy and making sure that China stays on the path of market-based reform. We'll be discussing the importance of a sustainable growth in China which improves the balance of trade. We will discuss ways to continue opening China's market to trade, competition, and investment. And we'll discuss our common interest in increasing energy efficiency and strengthening environmental stewardship.
The benefit of the Strategic Economic Dialogue is that we can meet with senior Chinese leaders who have responsibility for a range of subjects and consider these questions comprehensively. Rather than going issue by issue, we can look at all the items on the agenda and have conversations that really try to move the ball forward in many different areas: Currency, rule of law, intellectual property – all the issues that have become a familiar part of our relationship with China.
I'm looking forward to the trip. I think it will be a good discussion that lays the groundwork for important progress down the line. Our outlook with China has to be long-term. There is a tendency in Washington to want immediate answers, but a relationship this important will have consequences for our economy and for our nation over generations. The work we do this week and in future meetings should all be with an eye toward building a cooperative relationship for many years.
More and more, the people of China are realizing the benefits of a market-based economy. And as long-time practitioners of market economics, Americans have a lot of expertise to offer. From the founding of our country, Americans have worked to achieve big dreams, to improve their lives and the lives of their children. They've looked to the market to find a good job, to finance their entrepreneurial ideas, and of course to realize the epitome of the American Dream: homeownership.
Homeownership is a goal that unites Americans across racial, ethnic, and income lines. President Bush is particularly pleased that minority homeownership rates have increased in recent years, as overall homeownership levels have reached new heights. And throughout the Administration, we continue to look for ways to increase access to capital and financing, so that people who work hard and save can one day walk across the threshold of their very own home.
The value of mortgage products in the United States has grown significantly. As of September, outstanding mortgage debt totaled roughly $ 12.8 trillion – an increase of more than $5 trillion since the beginning of the decade. And today's mortgage-backed securities marketplace features substantial liquidity. The daily trading average of Agency Mortgage Backed Securities is nearly $244 billion, up from $38 billion a decade ago.
Fostering a robust mortgage lending industry and mortgage securities marketplace is an essential mission of the Treasury Department.
The housing sector makes significant contributions to our economy. Residential construction accounts for about five-and-a-half percent of GDP, or three-quarters of a $1 trillion in spending. And it directly accounts for about 3 percent of total employment in the U.S.
Activity in the housing sector helped to drive our recovery out of the recession of 2001. From 2003 to 2005, housing activity added about half a percentage point to overall GDP growth each quarter.
This year, activity in the sector has slowed down. But the overall health of our economy continues to be strong.
Our rate of growth for the last several years, particularly in the housing industry, had not been sustainable. As you all know, we have had a correction in the housing industry and we are in the process of transitioning to a more sustainable growth rate. Fortunately we have a diverse economy and consumer spending, the service sector, and corporate profits remain strong. And I believe that our economy remains strong. Unemployment is low, jobs are being created – more than seven million new jobs since August 2003 – and wages are rising, which means more Americans are realizing the benefits of our strong economy.
Your discussions throughout the day will help us to formulate a forward-looking strategy for a vital part of the American economy. From the Treasury perspective, we want to make sure that we have the right guidance in place to help people access home financing without taking unnecessary risks. Expanding opportunities for more people to buy a home is a good thing. But we do not want Americans to become over-extended and see their dream end in foreclosure.
These are important conversations that will have a real impact on people's lives. I appreciate your work to help more Americans achieve the dream of homeownership, and I look forward to learning about your views. Thanks again to OTS for bringing this forum together. And thank you all very much.