Treasury Secretary Henry Paulson reassured the American public Monday that the U.S. banking system is a "safe and sound one" following the weekend bankruptcy of investment bank Lehman Brothers and the Bank of America takeover of Merrill Lynch, and that he will take further action if needed to maintain stability.

Speaking at a press conference, Paulson reiterated that the housing correction is at the root of the challenges currently facing credit markets, and that there is "nothing more important" than market responsibility.

"I think we're making progress" in markets, Paulson said, but noted there have been "real rough spots along the road." He also said there is a "reasonable chance" that a recovery in the housing market could be months away.

He reassured the American people that they can be "very confident" in their accounts and the U.S. banking system.

When asked what led to the events seen recently, including the collapse of Lehman and the takeover of Merrill Lynch, Paulson said there have been "excesses" in the system that have built up over a long period of time. As such, he said the current, "archaic" regulatory system needs to be rebuilt.

Paulson said he doesn't take lightly putting taxpayer money "on the line" to support an institution and that the AIG meetings in New York on Monday are not about government bridge loans.

When asked if that could be read as no more government bailouts, Paulson said, "don't read it as no more, read it as it's important to maintain the stability of our financial system."

By Stephen Huebl and edited by Sarah Sussman
©CEP News Ltd. 2008