US Treasury Secretary Henry Paulson said on Thursday that reform of financial regulation was crucial but warned against hasty action that could lead to harm.

"The United States must lead global financial reform efforts, and we must start by getting our own house in order," Paulson said in a speech in California, according to the prepared text.

Paulson noted the global financial crisis has prompted "the most significant discussion of financial system reform in the last 60 years."

"If we do not correctly diagnose the causes, and instead act in haste to implement more rather than better regulations, we can do long-term harm," he said at the Ronald Reagan Presidential Library in Simi, California.

Among his recommendations for reform, Paulson called for supervision of hedge funds, the investment pools of the super-wealthy.

He also defended mark-to-market accounting, a method criticized for the current steep devaluations of company assets amid the financial meltdown that have rattled investor confidence and caused stocks to plunge.

"I know of no better accounting method, and welcome the steps to review and modify its implementation during severe market stress," Paulson said.