Speaking to business leaders in Washington, Paulson said although the U.S. market troubles are winding down, it might take some time for the nation to fully recover from its market woes related to the sub-prime mortgage crisis..

"The markets are considerably calmer now than they were in March. The de-leveraging and re-pricing of risk continue, as does the capital-raising that is so essential for our financial institutions to continue to support the broader economy," he said.

"Looking forward, I expect that financial markets will be driven less by the recent turmoil and more by broader economic conditions and, specifically, by the recovery of the housing market."

Paulson, a former chief executive of Wall Street investment bank Goldman Sachs, also said it will take time for investors to regain confidence in the markets.

"We should not expect to work through this process quickly and we should expect some bumps in the road ahead," he said.

Paulson also predicted "a faster pace of economic growth" before the end of 2008.

"Our economy is structurally sound, with long-term fundamentals that compare favorably to any other place in the world," Paulson said.