WASHINGTON — Despite their recent problems in light of the subprime crisis, Fannie Mae and Freddie Mac are “adequately capitalized,” Treasury Secretary Henry S. Paulson told lawmakers today.

The mortgage backers “need to continue to play an important role” in the future of our housing market, he said in testimony before the House Financial Services Committee. Paulson made no reference to a report in today's Wall Street Journal that said policymakers are working up contingency plans in case these GSEs (government sponsored enterprises) have further problems and need government help. Their stock value has dropped in recent days.

He also said that while “market practices and discipline on the part of financial institutions and investors are improving” there needs to be a fundamental restructuring of the regulatory system. Paulson cited his earlier proposal, which includes placing all financial institutions under one regulator, which has met with strong objections from the two major credit union trade associations.