WASHINGTON U.S. and global financial markets are continuing to adjust to a period of prolonged turmoil and the Bush administration is closely monitoring developments, two top Treasury Department officials said Tuesday.
Treasury Secretary Henry Paulson, testifying before the Senate Finance Committee, said that the administration has been closely watching capital markets since a severe credit crisis hit in August, roiling markets around the globe.
"While we are in a difficult transition period as markets reassess and re-price risk, I have great confidence in our markets," Paulson told the committee. "They have recovered from stressful periods in the past and they will again."
Paulson will be in Tokyo this weekend for a meeting of finance ministers and central bank presidents from the Group of Seven major industrial nations.
David McCormick, the department's undersecretary for international affairs, said that the market turmoil would be a top item on the discussion agenda at the meetings on Friday and Saturday.
McCormick said that "serious turmoil" is persisting, although he said financial institutions have taken a number of steps to address the problems.
"Since August, financial institutions have disclosed and written off more than $150 billion in assets and U.S. financial institutions have raised more than $95 billion in new capital," McCormick said at a briefing on the weekend talks.
McCormick said both of those developments were encouraging signs because past episodes of market turmoil had demonstrated the need to recognize losses and restore capital as "important steps toward restoring financial normalcy."