Today on CNBC’s “Street Signs” Erin Burnett spoke with Treasury Secretary Henry Paulson about a broad range of topics including his upcoming trip to China, his housing rescue plan and overseas investments in America, among other topics. Transcript follows…

BURNETT: IT HAS BEEN A VERY, VERY BUSY WEEK HERE IN WASHINGTON. THE NATION’S CAPITAL. THERE’S BEEN A PLAN TO ALLEVIATE THE SUBPRIME MORTGAGE MELTDOWN PUT FORTH BY THE WHITE HOUSE. TREASURY SECRETARY HENRY PAULSON WAS THERE. HE, OF COURSE S HEADING TO CHINA AS WELL TO CONTINUE THE STRATEGIC ECONOMIC DIALOGUE BETWEEN THIS NATION AND THAT ONE. FOR MORE NOW ON THE MENU OF WHAT IS GOING ON IN CHINA AND WHAT’S GOING ON WITH HOUSING, SECRETARY PAULSON JONES US NOW ON CNBC. THANK YOU SO MUCH FOR MAKING THE TRIP IN THE SLEET AND THE SNOW AND EVERYTHING MANY THINGS TO TALK ABOUT AND I WANT TO TALK ABOUT CHINA BUT FIRST BECAUSE THE NATION HAS HAD A NIGHT NOW TO DIGEST YOUR PLAN AND WE HAVE HAD A NIGHT TO UPGRADE OUR SERVERS BECAUSE WE’RE GETTING SO MANY E-MAILS ABOUT YOUR PLAN. I WANTED TO PUT A COUPLE OF THE BIG QUESTIONS TO YOU. THE FIRST ONE IS PEOPLE PERCEIVING THIS AS GOVERNMENT INTERVENTION, NOT SUPPORTING A FREE MARKET WORK THREW OF THE PROBLEM. WHAT’S YOUR RESPONSE TO THE PEOPLE WHO JUST INSISTENTLY KEEP SAYING THAT’S WHAT THIS IS.

PAULSON:I WOULD RESPECTFULLY SAY THEY’RE WRONG. THERE’S NO GOVERNMENT
MONEY IN THIS. THIS IS THE PRIVATE SECTOR COMING TOGETHER TO DEAL WITH
THE COMPLEXITIES COMING OUT OF THE SECURITIZATION PROCESS. GOVERNMENT
NEED TO FACILITATE THIS. WE NEEDED TO FACILITATE IT TO BRING IT TOGETHER
SO THAT THEY WOULD HAVE THE CAPACITY TO DEAL WITH THE COMING WAVE OF
RESETS THAT WE’RE GOING TO BE FACING. BUT AGAIN, REMEMBER, THE PRIVATE
SECTOR, INVESTORS DON’T BENEFIT FROM FORECLOSURES. THEY WANT TO AVOID
FORECLOSURES WHENEVER POSSIBLE AND THEY’RE GOING TO NEED SOME SIMPLE
CRITERIA TO STANDARDIZE THE PROCESS AND TO GIVE THEM ESSENTIALLY THE
SAME RESULT THEY WOULD HAVE WITH THE WORKOUTS ONE AT A TIME AND THEY
WON’T HAVE THE FLEXIBILITY TO DO THAT.

BURNETT: ISN’T IT TRUE THAT SOME PEOPLE ARE OUT THERE SAYING, OKAY,
SECRETARY PAULSON, YOUR PLAN IS INTERFERING WITH CONTRACTS AND YOU’RE
SHOWING PEOPLE THAT CONTRACTS CAN BE BROKEN IN THIS COUNTRY, BUT IT
WOULD APPEAR THAT IF YOU LOOK AT IT YOU CAN ADJUST CONTRACTS IF THE
INVESTORS SAID THAT’S A BETTER WAY TO GET MORE MONEY

PAULSON: THEY TRADITIONALLY DO THIS. THEY DO MODIFICATIONS. SO THIS
ISN’T — THERE ARE PLANS IN CONGRESS THAT WOULD INTERFERE WITH CONTRACTS
AND WE WANTED TO AVOID THAT. WHAT THIS PLAN DOES IS LET THE PRIVATE
SECTOR HAVE THE FLEXIBILITY TO DO WHAT THE SERVICING AGREEMENT GIVES
THEM THE FLEXIBILITY TO DO TO ADJUST THESE MORTGAGES, MODIFY THE
MORTGAGE FESS IT’S IN THE BEST INTEREST OF THE INVESTORS TO DO SO.

BURNETT: I KNOW YOU’VE BEEN WORKING WITH THE REPRESENTATIVE
ORGANIZATIONS OF MANY OF THE INVESTORS OUT THERE.OBVIOUSLY AS THE CEO OF
GOLDMAN SACHS YOU KNOW MOST OF THEM PERSONALLY. BUT I HAVE TO SAY OVER
THE PAST FEW DAY, PIMCO, BILL GROSS, ALL OF THEM I’VE SPOKEN TO, THEY’VE
ALL BEEN SUPPORTERS OF THIS PLAN. HAVE YOU BEEN SPEAKING TO INVESTORS,
THOUGH, OUTSIDE OF THE UNITED STATES SINCE MANY OF THE PEOPLE WHO HOLD
THE MORTGAGES AREN’T HERE.

PAULSON: ALL OF THE INVESTORS I’VE TALKED WITH HAVE BEEN GENERALLY
SUPPORTIVE, BUT THERE’S A LOT OFCOMPLEXITY HERE AND IT’S ONE THING TO
HAVE INVESTORS BE SUPPORTIVE AND IT’S ONE THING TO BRING EVERYBODY TO
THE TABLE AND MAKE SURE IT WORKS AND I’VE ALSO SEEN CRITICISM FROM THE
OTHER SIDE WHERE PEOPLE SAY, HEY, THERE WILL BE SOME OUT THERE WHO ARE
NOT GOING TO GET THE BENEFIT OF THIS MORATORIUM ON INTEREST PAYMENTS.

BURNETT: PERHAPS SOME WHO REALLY NEED IT.

PAULSON: WHAT I POINT OUT IS, FIRST OF ALL THIS, IS NOT ABOUT — IT’S
NOT DRIVEN BY THE OBJECTIVE OF FREEZING RATES.THIS IS DRIVEN BY THE
OBJECTIVE OF AVOIDING FORECLOSURES, OKAY? SO I THINK THE RIGHT UNIVERSE
TO LOOK AT IS, I THINK ABOUT THIS, THERE ARE GOING TO BE THOSE FACING
RESETS THAT ARE GOING TO HAVE NO TROUBLE MAKING THE PAYMENT. THIS IS NOT
TO DEAL WITH THEM AND THERE ARE GOING TO BE THOSE THAT HAVE DIFFICULTY
HAVING THE CAPABILITY TO OWN A HOME AND THEY NEED TO BE DEALT ONE OFF
AND THERE MAY BE AN FHA PRODUCT TO PUT THEM INTO OR THEY NEED TO BECOME
A RENTER.

BURNETT: ESSENTIALLY, IT’S STILL A CASE BY CASE.

PAULSON: AGAIN IN THE MIDDLE GROUP, WHAT THERE ARE ARE SOME SIMPLE
CRITERIA TO DEAL WITH THOSE WHO WILL VERY QUICKLY GET A RESET AND THEN
THERE’S ANOTHER GROUP THAT HAVE STRONGER CREDIT RATINGS THAT WON’T
IMMEDIATELY GET A MODIFICATION BUT WILL BE DEALT WITH ONE OFF AND THEY
OBVIOUSLY ARE NOT GOING TO BE PUSHED INTO FORECLOSURE AND IN MANY
INSTANCES THEY MAY GET THE SAME MODIFICATION THAT THE OTHERS GET, BUT
THEY’LL HAVE TO BE A NEED FOR THEM TO GET THAT.

BURNETT: RIGHT. SO ESSENTIALLY DO YOU THINK IT’S FAIR TO SAY THAT YOU
ARE THE MAN RIGHT NOW WITH THE RECESSION ON THEIR SHOULDERS, WHEREAS F
YOU CAN PUSH IT OFF WITH THIS PLAN —

PAULSON: I DON’T THINK THAT’S FAIR BECAUSE I DON’T — AGAIN, I THINK
I’VE BEEN PRETTY CLEAR IN SAYING WE HAVE AN ECONOMY IN THEU.S. THAT IS
FUNDAMENTALLY HEALTHY. I THINK THE JOBS NUMBERS TODAY SHOWED AN ECONOMY
THAT IS FUNDAMENTALLY HEALTHY. WE’VE GOT VERY STRONG DEMAND OUTSIDE OF
THE U.S.WE’VE GOT EXPORTS GROWING, EMPLOYMENT IS STRONG, INFLATION IS
CONTAINED. THERE ARE SOME RISKS AND I’M FOCUSED ON THOSE RISKS. THAT’S
MY JOB AND THE BIGGEST RISK WE HAVE IS HOUSING AND HOUSING IS A BIG DRAG
ON OUR ECONOMY AND STILL, WE’RE GOING THROUGH A TURBULENT TIME IN THE
CAPITAL MARKETS. THAT’S A RISK SO WE’RE FOCUSED ON THE RISKS, BUT LET’S
NOT FORGET THAT WE HAVE A HEALTHY ECONOMY.

BURNETT: I WANT TO TALK ABOUT YOUR TRIP TO CHINA NOW.YOU’RE GETTING
READY TO GO TO CHINA AND I KNOW YOU’VE BEEN 80 OR 90 TIMES OVER YOUR
CAREER IN CHINA.

PAULSON: I STOPPED COUNTING.I’VE BEEN A LOT.

PAULSON: YOU’VE HAD THE DIALOGUE, THE FORMAL, STRATEGIC ECONOMIC
DIALOGUE GOING OVER THE PAST YEAR. GOING THIS WEEKEND, WHAT ARE YOUR
SPECIFIC — THIS IS MY TO-DO LIST.

PAULSON: LET ME STEP BACK AND SAY THIS WILL BE THE THIRD MEETING WE HAVE
— THE THIRD BIG MEETING.BEE DO THESE TWICE A YEAR, BUT WE HAVE MULTIPLE
DISCUSSIONS THROUGHOUT THE YEAR AND, AGAIN, OUR FOCUS WITH THE STRATEGIC
ECONOMIC DIALOGUE IS ON THE VERYIMPORTANT BILATERAL RELATIONSHIPWE HAVE
WITH CHINA, THE ECONOMICRELATIONSHIP SAY VERY PART OF THAT. MANAGING IT
ON THE LONG-TERM BASIS, KEEPING IT ON AYE AN EVEN KEEL DURING TIMES OF
TENSION AND DEALING WITH THE MOST PRESSING, SENSITIVE ISSUES ALONG THE
WAY. THE REASON I STARTED THERE IS BECAUSE WHEN WE SET THIS UP LAST
SEPTEMBER, PRESIDENT BUSH AND PRESIDENT WHO, I DON’T THINK ANY ONE OF
US AT THAT TIME SAW PRODUCT SAFETY, FOOD SAFETY, THEWHOLE INTEGRITY OF
TRADE AS BEING THE KEY ISSUE THAT IT IS TODAY.

BURNETT: RIGHT.

PAULSON: BUT RIGHT NOW, IF YOU WOULD ASK THE AMERICAN PUBLIC, WHAT’S THE
BIGGEST ISSUE ON THEIR MIND, THAT’S WHAT IT IS.

BURNETT: YES.

PAULSON: IT’S VERY IMPORTANT TO THE AMERICAN PEOPLE.WE HAVE HIGH
EXPECTATIONS AND IT’S IMPORTANT TO THE CHINESE, AND I BELIEVE THE FACT
THAT WE’VE HAD THE STRATEGIC ECONOMIC DIALOGUE IN PLACE HAVE THOSE
CHANNELS OF COMMUNICATION HAVE HELPED AND MIKE LEVITT IS THE SECRETARY
OF HHS IS LEADING THIS EFFORT. HE’S BEEN VERY ACTIVE AND I WOULD THINK
THAT WOULD BE THE TOP AGENDA ITEM THAT WE HAVE.

BURNETT: THE PRODUCT SAFETY.THIS IS INTERESTING BECAUSE SURVEYS LOOKING
OVER THE WEEKEND, I WAS READING ON THIS AND MOST AMERICAN COMPANIES BY A
HUGE MARGIN ARE CONFIDENT WITH THE CHINESE SUPPLIES AND THEY’RE
CONFIDENT WITH THEIR TESTING AND CONFIDENT WITH THE PROCESSES IN PLACE,
BUT THE AMERICAN PUBLIC IS NOT CONFIDENT AND THEY’RE WORRIED. SO HOW
MUCH OF THIS IS A SAFETY ISSUE AT THIS POINT AND HOW MUCHOF IT IS AN
ISSUE OF PUBLIC PARANOIA AT THIS POINT?

PAULSON: AGAIN, AMERICAN PEOPLE HAVE VERY HIGH STANDARDS AND IT’S
NOTJUST AS IT RELATES TO TRADE WITH CHINA. IT’S A TRADE WITH EVERYONE
AND GLOBAL SITUATION HAS BROUGHT IN NEW OPPORTUNITIES AND NEW CHALLENGES
AND THERE HAVE BEEN MANY MORE BENEFITS THAN PROBLEMS AND AGAIN, THE WAY
I LOOK AT IT AND I’LL COME BACK TO WHAT YOU’VE SAID ABOUT THE AMERICAN
COMPANIES THAT ARE IMPORTING. I THINK INSPECTION IS IMPORTANT, BUT
BUILDING QUALITY IS REALLY WHAT’S IMPORTANT. THAT’S WHAT YOU’RE FOCUSING
ON. THAT’S WHAT MIKE LEVITT’S FOCUSED ON AND THEY WERE ALL FOCUSED ON,
AND I THINK IT’S IMPORTANT TO BOTH SIDES THAT WE HAVE CONFIDENCE IN THE
PRODUCTS THAT WE IMPORT BECAUSE THEY ARE VITALLY IMPORTANT TO OUR
ECONOMIC GROWTH IN MAINTAINING LOW LEVELS OF INFLATION MAXIMIZING THE
CHOICES FOR THE AMERICAN PUBLIC.

BURNETT: NOW, WHEN YOU ARE GOING TO –I KNOW THEY’RE OPENING A NEW
OFFICE FOR THE NEW YORK STOCK EXCHANGE.AMONG OTHER THINGS. I KNOW YOU’RE
NOT DOING THAT, BUT YOU’RE PRESENT AT THAT. WOULD YOU SAY THAT THE
CHINESE MARKETS RIGHT NOW ARE FAIRLY OPEN TO AMERICAN COMPANIES?
AMERICAN BUSINESS?

PAULSON: NO, I WOULD NOT SAY THAT, BUT WHAT I WOULD SAY IS THIS, THAT
THE CHINESE HAVE AGREED TO A CERTAIN SET OF STANDARDS AT THE TIME THEY
GAINED ACCESSION TO THE WTO, AND A LOT OF PEOPLE IN THIS COUNTRY ARE
FOCUSED ON WTO COMPLIANCE. I THINK THAT’S VERY IMPORTANT. WE HAVE
AGENCIES RESPONSIBLE FOR THAT IN THE U.S.WE HAVE DISPUTE RESOLUTION
MECHANISMS. WE HAVE DIALOGUES RESPONSIBLE FOR THAT. WHAT I’M REALLY
INTERESTED IN IS ENCOURAGING THE CHINESE TO SPEED UP THEIR PROCESS OF
OPENING TO FOREIGN INVESTMENT AND TO TRADE AND TO COMPETITION BECAUSE
IT’S IN THE BEST INTEREST OF THE CHINESE PEOPLE.IT’S GOING HELP THEM
DEVELOP THEIR ECONOMY IN A MORE BALANCED WAY AND AGAIN, I LOOK AT THE
OPPORTUNITY ALSO FOR THE U.S. THAT THIS IS OUR FASTEST-GROWINGEXPORT
MARKET.IT’S GROWING QUICKLY AND IT’S VERY IMPORTANT.

BURNETT: NOW, IN TERMS OF THE UNITED STATES. IS THE UNITED STATES OPEN
TO INVESTMENT FROM CHINA. SPEAKING TO THE CHINESE EMABASADOR RECENTLY HE
WAS VERY PASSIONATE WHEN DISCUSSION THE EXTREME DIFFICULTY THEY’VE HAD
IN HAVING CHINESE BANK BRANCHES AS AN EXAMPLE OPEN HERE.

PAULSON: WELL, LET ME SAY THIS. WE HAVE THE SAME STANDARDS FOR CHINA
THAT WE HAVE FOR EVERY OTHER COUNTRY IN THE WORLD.WE ARE OPEN AND
TOTALLY OPEN, BUT THERE ARE STANDARDS THAT NEED TO BE MET AND THE FED
SETS THOSE STANDARDS AND THE FED HAS VERY RECENTLY GRANTED A LICENSE AND
I THINK THE CHINESE ARE PLEASED WITH THAT TO, YOU KNOW TO COMMERCE BANK
AND SO THEY’VE GOT ANOTHER LICENSED APPLICATION PENDING, BUT WE ARE OPEN
TO INVESTMENT AND WE’RE AS OPEN AS ANY COUNTRY IN THE WORLD.

BURNETT: TWO MORE BRIEF QUESTIONS FOR YOU.THE FIRST IS OVERALL, A LOT OF
INVESTMENTS HAVE BEEN COMING INTO THE COUNTRY FROM OVERSEAS, NOT JUST
WITH CHINA BUT FROM THE MIDDLE EAST AND ABU DHABI GETTING A LOT OF
COVERAGE, BUT IT IS ONE OF MANY DEAL, BUT OVERALL THERE’S BEEN THIS
ISSUE OF OVERSEAS COUNTRIES OR THE SOVEREIGN WEALTH FUNDERS ON COMPANIES
CAN TAKE STASHGS FINANCIAL STAKE, BUT IT’S HARD FOR THEM TO TAKE
MANAGEMENT STAKES.IS THAT SOMETHING WE NEED TO CHANGE? IF YOU’RE GOING
TO BUY IN, BUY IN THE REAL WAY.

PAULSON: LET ME SAY THIS.THERE IS, AGAIN, I BELIEVE WE ARE AS OPEN AS
ANY COUNTRY IN THE WORLD TO INVESTMENT.IT’S MY JOB TO KEEP IT THAT
WAY.THERE IS PROTECTIONIST SENTIMENT HERE AND THIS IS NOT NEW.FOR AS
LONG AS I CAN REMEMBER, CERTAIN MEMBERS OF THE PUBLIC, MEMBERS OF
CONGRESS ARE THIS EARLY OPPOSED TO FOREIGN INVESTMENT. NOW, SOVEREIGN
WEALTH FUNDS ARE AN IMPORTANT PART OF THE GLOBAL CAPITAL MARKETS.THEY
REPRESENT ROUGHLY THE SAME PERCENTAGE OF GLOBAL WEALTH AS THEY DID A
NUMBER OF YEARS AGO, BUT THEY’RE PROJECTED TO GROW QUICKLY AND THERE’S A
LOT OF FOCUS SOVEREIGN WEALTH FUNDS. SO ON TREASURY, WE’RE WORKING
ONTHIS FROM TWO PERSPECTIVES.NUMBER ONE, WE’RE WORKING WITH DEVELOPED
COUNTRIES AROUND THE WORLD. OECD MEMBERS, JC MEMBERS TO COME UP WITH
GUIDELINES AND PRINCIPLES FOR INVESTMENT BECAUSE WE DON’T BELIEVE THAT
THOSE WHO ARE PROTECTIONISTS CAN USE SOVEREIGN WEALTH FUNDS AS A
BOOGIEMAN OR AS AN ARGUMENT AGAINST INVESTMENT AND WE’RE WORKING WITH
SOVEREIGN HEALTH FUNDS TO COME UP WITH THEIR PRINCIPLES AND GUIDELINES
AND BEST PRACTICES TO ASSURE THE REST OF THE WORLD THAT THEY ARE DRIVEN
BY LEGITIMATE ECONOMIC GOAL SAYS AS OPPOSED TO POLITICAL OR STRATEGIC,
BUT, YEAH, WE WELCOME AND WE LOOK AT INVESTMENTS AND I SHARE THE PROCESS
AND WE LOOK AT INVESTMENTS WITH AN EYE TOWARD NATIONAL SECURITY AND WHEN
THEIRINVESTMENTS BY GOVERNMENT CONTROLLED ENTITIES, WE LOOK AT THEM
PARTICULARLY CAREFULLY, BUT WE AGAIN WELCOME THAT INVESTMENT.

BURNETT: SECRETARY PAULSON, THANK YOU VERY MUCH.WE APPRECIATE YOUR
COMING BY AND GOOD LUCK.SAFE TRIP TO CHINA.