Bush backs markets to ride out crisis
By Krishna Guha and Andrew Ward in Washington
Copyright The Financial Times Limited 2007
Published: August 8 2007 21:13 | Last updated: August 8 2007 23:02
President George W Bush played down the notion of giving Fannie Mae and Freddie Mac a larger role in efforts to stabilise the troubled US mortgage market, as he expressed confidence that financial markets are functioning well in spite of bouts of volatility.
Mr Bush told reporters that the government-sponsored mortgage companies should “focus on their core business.” He did not rule out loosening limits on their investment portfolios but said the entities should be “reformed first” adding “now is the time to get it done”.
The president said the financial markets were performing their job as investors repriced risk, and sounded confident that they would soon stabilise as investors focused on sound US fundamentals.
“There is a lot of liquidity in our system,” Mr Bush said, adding “conditions for the market place working through these issues are good”.
The president’s remarks came after a day of meetings with his advisers at the US Treasury. Mr Bush said he was interested in a proposal floated by Hank Paulson, the Treasury secretary, to finance a reduction in the US corporate tax rate by eliminating some corporate tax breaks.
However, he said it was too early to say whether the administration would put propose corporate tax legislation.
Mr Bush meanwhile sought to draw broad political dividing lines on tax, public spending and free trade, accusing Democrats of plotting the biggest tax increase in US history, endangering the solid economic growth achieved over the past four years.
He renewed his threat to veto Democratic plans to increase next year’s federal budget above the $933bn requested by the White House. The comments signalled an escalation in tensions between the Bush administration and Congress.
The remarks appeared aimed at reclaiming the initiative in the debate over economic policy at a time when Democrats are seeking to exploit widespread pessimism among middle-class Americans about the direction of the US economy.
“I will use the veto to keep your taxes low and keep federal spending under control,” he said in a public statement.
Congress will have less than a month to pass budget legislation before the end of the fiscal year when lawmakers return from their summer recess in September. If the deadline is missed, the federal government would face a funding crisis.