A dose of realism over the economy

U.S. Treasury Secretary Henry Paulson addresses developments in financial markets.

TEXT OF STORY

Scott Jagow: To this point, the Bush Administration has stayed away from the word "recession." Treasury Secretary Henry Paulson has been the spokesman on the economy. He's maintained that strong global growth and U.S. economic resilience will win out.

But doubt may be creeping in just a bit. This morning on NBC's Today Show, Paulson made up a new word for our economic struggles:

Henry Paulson: We know we're in a sharp . . . downcline, and there's no doubt that the American people know that the economy has turned down sharply. So to me, much less important is the label that's placed on it today. Much more important is what we do about it.

Marketplace's Janet Babin has more on what the administration might do:


Janet Babin: Even today, Secretary Paulson stopped short of saying we're in a recession. But that's a word many economists have been using for months.

Mark Zandi at Moody's Economy.com is one of them. He says the events of the past few days have been impossible for the government to ignore:

Mark Zandi: The administration has decided it's no longer useful to be cheerleading. A dose of realism is now called for and will shore up confidence more than trying to tell everyone that everything's OK.

Admitting the problem could lay the groundwork for a more aggressive federal response.

Duke University professor Campbell Harvey says a number of options should be on the table:

Campbell Harvey: One simple thing that the Fed could do is to go in and start purchasing high-quality mortgages. That would instantly drive up prices and reduce rates.

Harvey says that fix would address the economy's root problems -- the housing and mortgage markets.

I'm Janet Babin for Marketplace.

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