Speaking at the Public Library in New York City Monday, Paulson said, securing support for the Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association is "critical."

"Investors … around the world need to know that we understand how important these institutions are to our capital markets," he said.

Freddie Mac (NYSE:FRE) holds $5 trillion in debt and mortgage backed security guarantees with over $3 trillion of these held by domestic institutions and $1.5 trillion held by institutions and central banks overseas, Paulson said.

The Treasury Department is urging Washington lawmakers to approve a bill giving Freddie Mac and Fannie Mae (NYSE:FNM) increased lines of credit and giving the federal government the ability to purchase equity in the companies.

While the housing market continues to slide, "now, more than ever, we need Fannie and Freddie out there, financing mortgages," he said.

Paulson said he would "rather not be in the position of asking for extraordinary authorities to support the GSEs."

"But I am playing the hand that I have been dealt," he said.