Officials to dissect subprime collapse

WASHINGTON -- Treasury Secretary Henry Paulson said his department will gather federal and state banking regulators to discuss the "lessons learned" from the collapse of the subprime lending market.

"As we think about the lessons learned, we need to think about the regulatory structure," Paulson told a House committee yesterday. "Also, we need to think through the consumer protection area, in terms of looking at issues like predatory lending and fraud."

More than 30 subprime lenders have closed since late 2006, hurt by rising defaults by less credit-worthy borrowers. The number of foreclosures on US homes jumped by 12 percent in February, compared with a year earlier, as borrowers struggled with falling home prices and higher adjustable mortgage rates.

Paulson repeated that he thinks the economic damage from the subprime lending crisis is "contained." The US economy remains healthy, buoyed by exports, consumer spending and moderate inflation, he said.

Robert Steel, the Treasury's undersecretary of domestic finance, will organize the meetings with regulators, Paulson said.

Steel's spokeswoman declined to provide details on the meetings.

Paulson went to Capitol Hill to defend his request for a 4.5 percent increase in his department's budget to expand initiatives to combat terrorism and vet national security threats from international takeovers of US companies.

The Treasury chief was scheduled to make similar testimony at the Senate.

The congressmen Paulson faced showed little interest in the Treasury's budget request. Questions during Paulson's hourlong appearance ranged from the Treasury's handling of US restrictions on travel to Cuba to South Korea's ban on US beef imports to the risks posed by foreign holdings of US debt.

Asked what concerned him most about the economy, Paulson said the growing gulf between rich and poor. He called the income gap the greatest challenge.