The irrational faith, already proven wrong once and again through history, in pure liberal Smithist economics and the corresponding invisible hand, resurrected by Ronald Reagan and Margaret Thatcher in the 80s, is now being dumped hastily without further ceremonies.
Paulson made those declarations after supporting, with the full blessing of George Bush Jr. but the negative reaction of John McCain, the quasi-socialist measures to spend public money in saving the broken financial system.
It must really be a most humbling experience for those who have for so long advocated that "free markets" can regulate themselves and have scrapped most of the Keynesian safeguards estabilished in the 1930s after the Big Crash of 1929. It was already known that "free market" cannot work safely without proper and continuous state surveillance (after all not even property can be guaranteed without it) but irrational faith, briefly supported but some good results, overcame common sense. The bubble nature of this liberal illusion was well known (people cannot buy more than they earn, the prices of basic commodities such as houses cannot grow beyond what people can pay in a lifetime of hard work) and, as was easy to foresee, it burst.
Now it's time to clean the debris and see if the crumbling building can be restored somehow. But I suspect it is another example of "too little, too late", that the very heart of US-centered economical system is deadly injured and that we are witnessing a major collapse (if not THE collapse) of Western civilization.
After all, after five centuries of wild expansionism, there's nowhere else to go, planetary ecology is critically damaged and everybody else is trying to imitate the Western "success" model, making everything a lot more expensive and unsustainable. There is a fundamental fallacy in the Capitalist model: that consumerism means growth. Certainly as we consume more and more, accountable "production" also does, but a lot of non-accounted destruction also happens too. The very model of work-produce-consume (Kerouac's description) without further considerations is not viable anymore (it never was but Earth and the working class paid for it) . A radical redefinition of economy is urgently needed but the stakes are still in saving the broken Capitalsit system and the interests attached to it. It will not work, not anymore. It is late even for Keynesianism.
The future will take care of its own problems, said Keynes... but the future is now.