Subprime Q&A with George W

From White House transcript of today's press conference.

Q Mr. President, I want to get your thoughts about the volatility in the financial markets, but specifically, a series of questions. Do you think that housing prices will continue to fall? Do you think that the inability of people to borrow money the way they used to is going to spillover into economy generally? And what are you prepared to do about it? And, specifically, are you considering some kind of government bailout for people who might lose their homes?

THE PRESIDENT: David, I'm wise enough to remind you that I'm not an economist, and that I would ask you direct predictions and forecasts about economic matters to those who make a living making forecasts and predictions. I suspect you'll find on the one hand, on the other hand, in how they predict. (Laughter.)

Now, what I focus on are the fundamentals of our economy. My belief is that people will make rational decision based upon facts. And the fundamentals of our economy are strong. I mentioned some of them before. Job creation is strong. Real after-tax wages are on the rise. Inflation is low. Interestingly enough, the global economy is strong, which has enabled us to gain more exports, which helped the second quarter growth numbers to be robust, at 3.4 percent.

Another factor one has got to look at is the amount of liquidity in the system. In other words, is there enough liquidity to enable markets to be able to correct? And I am told there is enough liquidity in the system to enable markets to correct. One area where we can help consumer -- and obviously anybody who loses their home is somebody with whom we must show enormous empathy.

The word "bailout," I'm not exactly sure what you mean. If you mean direct grants to homeowners, the answer would be no, I don't support that. If you mean making sure that financial institutions like the FHA have got flexibility to help these folks refinance their homes, the answer is yes, I support that.

One thing is for certain, is that there needs to be more transparency in the -- in financial documents. In other words, a lot of people sign up to something they're not exactly sure what they're signing up for. More financial literacy, I guess, is the best way to put it. We've had a lot of really hardworking Americans sign up for loans, and the truth of the matter is they probably didn't fully understand what they were signing up for. And therefore, I do believe it's a proper role for government to enhance financial education initiatives, and we're doing that, we've got money in the budget to do that.

Let's see here --

Q Can I just ask one follow up, sir? Come on. (Laughter.)

THE PRESIDENT: Sure.

Q Because you weren't this circumspect when you were talking to reporters yesterday about the economy.

THE PRESIDENT: How do you know? You weren't there, David.

Q Well, you're right, I wasn't, but --

THE PRESIDENT: I'm curious to know why you weren't there. Ask Baker, he was there. (Laughter.)

Q Only economics reporters were allowed.

THE PRESIDENT: I think I pretty much said the same thing yesterday, in all due respect.

Q What's going on in the housing market, is it a correction or a crisis, in your view? Can you assess that?

THE PRESIDENT: Yesterday I did comment upon that, that there was a -- I talked about the different scenarios that I had been briefed on about whether or not there would be a precipitous decline in housing or whether it would be what one would call a soft landing, and it appeared at this point that it looks we're headed for a soft landing. And that's what the facts say.

...

Q Sir, getting back to the credit crunch caused by defaults in sub-prime mortgages, should Fannie Mae and Freddie Mac be allowed to buy mortgages beyond their current limits, or play any additional role that could help revive mortgage finance?

THE PRESIDENT: As you know, we put up a robust reform package for these two institutions, a reform package that will cause them to focus on their core mission, first and foremost; a reform package that says like other lending institutions, there ought to be regulatory oversight. And therefore, first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options.

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