Treasury Secretary Henry Paulson said in an interview on FOX Business Network that lending support to troubled mortgage companies Fannie Mae and Freddie Mac is key to turning around the U.S. economy. A “housing correction” has been central to the economic downturn that has roiled global financial markets for more than a year, Paulson told FOX Business reporter Adam Shapiro.

A key element to any turnaround will be making certain that consumers can buy homes, he said. Since the mortgage crisis began in mid-2007, several large mortgage companies have collapsed and many commercial banks have all but abandoned home loans. Consequently, Fannie Mae (FNM) and Freddie Mac (FRE), known as government sponsored enterprises because they are backed by Washington, now fund about 70% of all new mortgages. The Bush Administration is proposing temporary measures to ensure Fannie Mae and Freddie Mac’s continued stability.

In addition, the administration is seeking support from Congress for a new independent regulator who, according to Paulson, would help contain the systemic risks that contributed to the current downturn. “We need stability in these markets and investors here and around the world need to understand and need to know that we understand the importance of these institutions to our capital markets more broadly and to housing,” Paulson told FOX Business.