By David Lawder

SUNNYVALE, Calif., March 7 (Reuters) - U.S. Treasury Secretary Henry Paulson said on Friday he supports the Federal Reserve's action to inject more liquidity into the banking system, but he wants financial institutions, including Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research) , to raise more equity capital.

"I'm very supportive of the Fed's actions, they've taken a number of innovative steps to provide term liquidity and I think that's really what the market needs and it's positive and it's well received," Paulson told reporters after meeting with employees of an alternative energy company here.

Paulson, asked whether the government should backstop mortgage-backed securities through an explicit guarantee or purchasing them in secondary markets, he said he wanted Fannie and Freddie to raise new equity capital so that they could keep lending and meet their mission of supporting the housing market.

"I want them to raise equity. they can raise equity without legislation," Paulson said. "They can raise equity and have a strong equity base and I want them to have the (regulatory) reform and the strong independent regulator."

He said there was "no excuse" for Congress not to pass a bill to create stronger oversight of the two massive housing finance giants.

But he added that the House and Senate were "very close to getting a compromise" on a bill that would modernize the Federal Housing Administration and raise lending limits for federally guaranteed loans. This would help an additional 300,000 distressed borrowers to refinance their mortgages, he said.

Paulson said an earlier meeting with chief executives of California-based technology companies including Apple Computer Inc. (AAPL.O: Quote, Profile, Research), Intel Corp. (INTC.O: Quote, Profile, Research) and Hewlett-Packard, painted another picture of uncertainty about the economy.

He said in most cases, the CEOs said their businesses outside the United States were strong, and their domestic businesses were "holding up" but they expressed concern about the outlook.

"I had people repeatedly say to me, "You know, It doesn't feel that bad to us, but whe're concerned about confidence turning down and it going over and impacting what we do," he said. (Reporting by David Lawder; Editing by Diane Craft)