Obama discusses housing crisis with Treasury chief

July 29, 2008 6:03:26 PM PDT
Democratic presidential candidate Barack Obama and Treasury Secretary Henry Paulson on Tuesday discussed the mortgage crisis and steps the government is taking to shore up the faltering economy, his campaign said.

Obama also discussed the economy with Federal Reserve Chairman Ben Bernanke, part of his latest effort to shift his campaign's attention to domestic issues after a weeklong trip to the Middle East and Europe. Obama has talked mostly about the economy since returning.

The Illinois senator met with Bernanke for an hour, and issued a statement describing it as "informative."

Spokesman Michael Ortiz said they discussed the outlook for consumers and businesses, and the effect of rising home foreclosures on families nationwide. They also talked about the "strengths of Fannie Mae, Freddie Mac and other financial institutions," he said.

Ortiz said Obama "made clear his respect for the independence of the Federal Reserve system and the special importance of its role during periods of economic uncertainty."

Obama called Paulson as he rode to a meeting with Pakistan's new prime minister, the campaign said. As part of the government's effort to provide mortgage relief to hundreds of thousands of homeowners, Paulson has sought emergency power to rescue lending giants Fannie Mae and Freddie Mac.

The housing plan Congress approved last week and President Bush has promised to sign would provide mortgage relief for 400,000 homeowners who can't afford their payments. Rather than lose their homes, they will be able to refinance with more affordable, government-backed loans.

"Sen. Obama asked how the Treasury Department plans to use its new authority with Fannie Mae and Freddie Mac and whether the government has the tools it needs to address the challenges in the banking industry," the campaign said in a statement. "Sen. Obama believes that the new housing legislation should be used as a way to protect homeowners and not bail out shareholders or managers."

Obama met with Pakistan's new leader, Prime Minister Yousuf Raza Gilani.

He said at a fundraising luncheon that he told Gilani "the only way we're going to be successful in the long term in defeating extremists ... is if we are giving people opportunities. If people have a chance for a better life, then they are not as likely to turn to the ideologies of violence and despair."

Obama later issued a statement calling the discussion, which included such topics as nuclear proliferation, human rights and terror threats from Pakistani tribal areas, "productive and wide-ranging." He said Pakistan is an important U.S. partner.

Bush, who welcomed Gilani to the White House on Monday, praised him as a reliable partner in confronting extremism.

U.S.-Pakistan relations have been strained by the war in Afghanistan and questions about the whereabouts of al-Qaida leader Osama bin Laden, who some believe may be hiding along the Afghanistan-Pakistan border. The U.S. has been pressuring Pakistan to take action against strongholds of Taliban and al-Qaida fighters believed to be in that nation's frontier.

Obama has called for increasing U.S. troop strength in Afghanistan and has said that as president he would take unilateral action if bin Laden were found to be in Pakistan, which angered Pakistanis when he first said it last year.

Making the point again this month, Obama said "if Pakistan cannot or will not act, we will take out high-level terrorist targets like bin Laden if we have them in our sights."

Obama also met privately with House Democrats and all emerged to make clear it was a pep talk.

"We told him we'd be there to work for him," said House Speaker Nancy Pelosi of California.

Obama said he sensed opportunity for Democrats "if Democrats can make clear our vision, which is not for a larger government, but is for a responsive, efficient, honest government that is listening to the voices of the American people."