Bush: Financial system is 'basically sound'

WASHINGTON - President Bush urged lawmakers on Tuesday to move quickly to help prop up mortgage giants Fannie Mae and Freddie Mac, while declaring the nation's financial system to be "basically sound."

"We must ensure that they can continue providing access to mortgage credit during this time of financial stress," Bush said of the two mortgage giants.

He also called on the Democratic-run Congress to follow his example and lift a ban on offshore drilling to help increase domestic oil production.

"I readily concede it won't produce a barrel of oil tomorrow, but it will reverse the psychology," Bush told a White House news conference.

Bush said the two troubled mortgage companies play a central role in the nation's housing-finance system and that government action to help them were not bailouts, since the two would remain shareholder-owned companies.

"I don't think the government ought to be involved in bailing out companies," Bush said.

Amid soaring gas prices, the toughest real estate market in decades, falling home prices and financing that's harder to come by, Bush said: "It's been a difficult time for many American families."

But he also said that the nation's economy continues to grow, if slowly.

Depositors reassured
Bush said that despite the woes of Fannie Mae and Freddie Mac and the recent government takeover of California bank IndyMac, U.S. depositors should not worry because their deposits are insured by the government up to $100,000.

Video   Bush on economy, war, Obama July 15: At a White House news conference, President Bush discusses his war policy, the economy, and what advice he might give Barack Obama. Watch the entire event. MSNBC

"If you're a depositor, you're protected by the federal government," Bush said.

The Bush administration and the Federal Reserve announced an emergency rescue plan Sunday to bolster Fannie Mae and Freddie Mac, which hold or guarantee more than $5 trillion in mortgages — almost half of the nation's total.

The plan would temporarily increase a long-standing Treasury line of credit that could be provided to either company. Treasury also said it would, if necessary, buy stock in the companies to make sure they have enough money to operate.

The Fed also announced that it would allow Fannie and Freddie to get loans directly from the Fed — a privilege previously granted only to commercial banks until this March, when the Fed extended the borrowing to investment banks to deal with the collapse of Bear Stearns.

At the same time, a housing package was heading toward final congressional passage. It would modernize the Federal Housing Administration and create a new regulator and tighter controls for Fannie Mae and Freddie Mac.

It's this legislation that Bush urged Congress to pass as soon as possible.

'Not as good as we'd like'
"I understand there's a lot of nervousness," Bush said. "The economy is growing. Productivity is high. Trade's up. People are working — it's not as good as we'd like. And to the extent that we'll find weakness, we'll move."

Bush acknowledged it could take years before opening the Outer Continental Shelf to oil drilling would result in increased U.S. production. But, he said, at least it would put the nation on the right track toward reducing its reliance on imported oil.

"There is no short term solution," Bush said. "The president doesn't have a magic wand. You can't just say, 'Low gas.'"

Asked about his comment earlier this year that he hadn't heard of $4 gasoline, Bush said: "I've heard of it now."

It was Bush's first full-blown exchange with reporters at the White House since April 29.

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