U.S. Treasury Sec. Henry Paulson doesn’t want the power to take over hedge funds in trouble, but he may need it.

Paulson, who also took time yesterday to urge Congress to pass Pres. Bush’s plan to bail out mortgage giants Fannie Mae and Freddie Mac, said the Treasury needs the authority to manage the collapse of large hedge funds.

“I would rather not ask for extraordinary powers, but I’m playing the hand I’ve been dealt,” he said.

Specifically, he asked for “additional powers to manage the resolution, or wind-down, of large non-depositary financial institutions, such as larger hedge funds, so as to limit the impact of a failure on the broader financial system.”

“Over the last several weeks, the need to move quickly toward an optimal regulatory structure that establishes a prudential financial regulatory system, focused on promoting long-term market stability has become all the more apparent.”

Paulson had previously supported giving the Federal Reserve greater oversight power over hedge funds.