- The Washington Times - Wednesday, July 16, 2008

President Bush and top lawmakers on Tuesday sought to settle jittery financial markets and anxious Americans, insisting that facts, not fear, need to drive efforts to stimulate the flagging economy.

Mr. Bush, acknowledging that times are tough, expressed confidence in the economy´s foundation despite a report that shows inflation rising at the fastest pace in more than a quarter-century and the ongoing assault of record gas prices, plunging home values and the prospect of more bank failures.

“But our economy’s continued growing, consumers are spending, businesses are investing, exports continue increasing and American productivity remains strong. We can have confidence in the long-term foundation of our economy, and I believe we will come through this challenge stronger than ever before,” Mr. Bush told reporters during his first White House press conference since late April.

Democratic leaders on Capitol Hill renewed calls for a second stimulus package, and Senate Banking, Housing and Urban Affairs Committee Chairman Christopher J. Dodd, Connecticut Democrat, appealed for calm.

“It is important to distinguish between fear and facts. In our markets today, far too many actions are being driven by fear and ignoring crucial facts,” Mr. Dodd said.

After meeting with economists, House Speaker Nancy Pelosi, California Democrat, credited recent tax rebates of $600 to individuals and $1,200 for married couples with helping the economy and said Congress will consider similar efforts.

Mr. Bush showed little interest, and Senate Majority Leader Harry Reid, Nevada Democrat, was cautious about following too quickly on the $168 billion measure passed in February, saying the economy will be better aided by pouring money into infrastructure development, like bridges, highways and dams, and for renewable energy.

“We’re always open-minded to things, but … let’s see how this stimulus package works,” Mr. Bush said.

Nonetheless, the Dow Jones Industrial Average closed below 11,000 for the first time in two years, and leaders in both parties continued to scramble to stem the election-year economic malaise that is turning up the political heat.

Using a personal story about seeing a run on the bank in his hometown of Midland, Texas, Mr. Bush said he understands nervousness but stressed that the banking system is “basically sound” and a depositor’s money is insured by the government up to $100,000.

“I’ll never forget the guy standing in the bank lobby say, ‘Your deposits are good. We got you insured. You don’t have to worry about it, if you’ve got less than 100,000 in the bank.’ The problem was, people didn’t hear,” Mr. Bush said.

“And there’s a - you know, became a nervousness. My hope is, is that people take a deep breath and realize that their deposits are protected by our government,” he said.

On Monday, banking stocks plummeted, and in California, customers lined up outside IndyMac Federal Bank to withdraw their deposits.

Mr. Dodd said concerns about the solvency of Fannie Mae and Freddie Mac - who hold or guarantee about half of the nation’s roughly $10 trillion in mortgages - are overblown.

“Fannie Mae and Freddie Mac have core strengths that are helping them weather the stormy seas of today’s financial markets. They are adequately capitalized. They are able to access the debt markets,” he said.

The president also urged Congress to pass a housing bill and to approve oil exploration in areas off U.S. coasts that are currently protected for environmental reasons.

Mr. Bush on Monday removed an executive order banning offshore drilling, putting pressure on Congress to lift its own moratorium, so states can open coastal waters to oil exploration.

“I readily concede that, you know, it’s not going to produce a barrel of oil tomorrow, but it is going to change the psychology that demand will constantly outstrip supply,” Mr. Bush said. “There is a psychology in the oil market that basically says supplies are going to stay stagnant while demand rises.”

Democrats stuck to their position that oil companies already have 68 million acres of fields under lease where they are not drilling.

“The main organization that [Mr. Bush] is trying to help are the oil companies,” said Mr. Reid. “What he wants to do is give these oil companies, who last year made $250 billion net profit, he wants to give them more.”

On the housing bill, House lawmakers continued to hammer out a massive mortgage rescue deal, which Democratic leaders said could be ready for a floor vote as soon as Thursday. The Senate approved a version of the bill Friday.

Key lawmakers from both parties and houses of Congress said the package likely will include Bush administration proposals announced Sunday to financially shore up Fannie Mae and Freddie Mac.

“I’m optimistic we’re going to complete the process this week, and I’m also optimistic that the administration’s recommendations will be a part of it,” said Senate Minority Leader Mitch McConnell, Kentucky Republican.

The bill’s centerpiece is a $300 billion aid package that would allow struggling homeowners to refinance their mortgages at lower rates, with the loans backed by the government. The package also calls for the establishment of an independent regulator to oversee Fannie Mae and Freddie Mac and an overhaul of the Federal Housing Administration.

  • Sean Lengell contributed to this report.
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