The central bank opened its discount window on a temporary basis to the handful of Wall Street banks that serve as primary dealers of U.S.  Treasuries as it facilitated a bailout of Bear Stearns two weeks ago. Since the 1930s, only commercial banks, which hold deposits and are heavily regulated, have been allowed to borrow funds from the Fed's discount window.

However, the Treasury secretary stopped short of advocating that the Fed permanently provide credit to all investment banks, saying such a move was "premature."

Paulson's remarks echoed calls by Democratic lawmakers for tightening regulation of Wall Street banks if they are to receive permanent access to the Fed's credit. House Financial Services Chairman Barney Frank (D-Mass.) last week called for federal oversight of the risks that threaten financial markets.

Paulson said that the Fed would need to gather more information from investment banks benefiting from its liquidity facility. The central bank would also need to establish guidelines for granting credit to such banks.