Excerpts from remarks today at the Capital Markets Summit.

Secretary Paulson on the economy:

We share a commitment to competitive markets, and Treasury will soon release a Blueprint for Regulatory Reform that proposes a financial regulatory framework which we believe will more effectively promote orderly markets and foster financial sector innovation and competitiveness.

As you know, financial market stress began last August and has led to significant de-leveraging and repricing of risk, and sentiment has swung hard to risk aversion. There have been, as there always are during periods like this, bumps in the road and unpleasant surprises along the way. 

I am constantly asked how much longer will this take to play out and if this is the worst period of market stress I have experienced.  I respond that every period of prolonged turbulence seems to be the worst until it is resolved.  And it always is resolved.  Our economy and our capital markets are flexible and resilient and I have great confidence in them.  I am certain we will work through this situation and go on to new heights as we always do. 

As we work our way through this turbulence, our highest priority is limiting its impact on the real economy.  We must maintain stable, orderly and liquid financial markets and our banks must continue to play their vital role of supporting the economy by making credit available to consumers and businesses.   And we must of course focus on housing, which precipitated the turmoil in the capital markets, and is today the biggest downside risk to our economy.  We must work to limit the impact of the housing downturn on the real economy without impeding the completion of the necessary housing correction.   I will address each of these in turn.  Regulators and policy makers are vigilant; we are not taking anything for granted.
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James Turley's three principles:

...what I’d like to do is highlight three principles that will give investors more complete information about companies—principles which, when embraced, could set a foundation for higher levels of investor confidence. These aren’t dramatic, new ideas—but instead are principles whose time has certainly come for full implementation.

First, is the need for greater transparency and disclosure, given how globalized and complex the markets have become.

Second, is the importance of companies—and regulators—placing greater emphasis on internal controls, and other elements of risk management.

And third, is the value of common standards and practices uniting capital markets—both those in developed markets and in emerging markets.
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Tom Donohue's Conclusion

It would be a tragedy if the lesson Americans draw from the current crisis is that our capital markets are the cause of our economic problems, when, in reality, they must be central to the solution.

Every company--large or small, public or private--needs capital. New ideas, innovations, and jobs must have financing to take root and grow.

Individuals, too, rely on capital markets. A clear majority of families are now investors, depending more than ever on markets to fund retirement, college tuition, and a high quality of life.

Every citizen, family, and business has a critical stake in ensuring that our nation is home to the strongest, fairest, and most efficient markets in the world.

That's why we need a thorough and careful evaluation of our capital markets. But as we fix the engine under the hood, we've got to make sure that when we're done, the car still runs--and runs at peak performance.

We must make sure that at the end of the day, America has the most successful and prosperous capital markets in the world … that they benefit all investors from Main Street to Wall Street … that all actors in the markets are guided by clear, fair rules with tough penalties for those who break those rules … and that we don't end up killing the goose that lays the golden eggs in our free enterprise system.

That's why our Center for Capital Markets Competitiveness exists. It is why we have gathered together smart, solutions--oriented experts to have a timely discussion about the future of our capital markets.

We have important work to do. Let's roll up our sleeves and get to it.
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