Secretary of the Treasury Hank Paulson states that housing and the subprime mortgage crisis are the biggest threats to the American Economy

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Welcome to the party, Hank Paulson – what took you so long to get here? Waiting for Bernanke, I suppose? Well it sure is nice that the two of you finally decided to show up. While you were busy perpetuating the white lie that subrpime mortgage problems were contained; we’ve been busy shooting holes in your theories over here, and are glad to see someone with authority finally come “to the confessional” (as Tanta from C/R likes to say).

From Paulson – to you (via Market Watch):

“The ongoing housing correction is not ending as quickly as it might have appeared late last year,” Paulson said in remarks prepared for delivery at Georgetown University. “And it now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet.”

“Let me be clear,” Paulson said, “despite strong economic fundamentals, the housing decline is still unfolding. … The longer home prices remain stagnant or fall, the greater the penalty to our future economic growth.”

He echoed Bernanke’s concerns about housing and mortgage markets expressed Monday:

“Conditions in financial markets have shown some improvement since the worst of the storm in mid-August, but a full recovery of market functioning is likely to take time and we may well see some setbacks,” Bernanke said.

It does seem pretty clear that the housing market downturn isn’t over, he said.

The housing sector was weakening even before the credit crunch began in early August, and conditions in the mortgage sector remain out of whack two months later, Bernanke said.

That will pull down growth in the fourth quarter and into 2008, he said.

“The further contraction in housing is likely to be a significant drag on growth in the current quarter and through early next year,” Bernanke said.

The only problem I see with their statements? They are still sugar coating it.