President George Bush and Treasury Secretary Henry Paulson on Monday downplayed the need to stimulate the economy beyond existing measures in the face of recession fears and weak economic data. As the stock market has tanked in its 2008 debut and investors and economists increasingly fret about recession, Bush urged that Congress make temporary tax cuts enacted by his administration permanent, while he and Paulson, in a separate speech, heralded plans to help some homeowners caught in the burgeoning mortgage crisis as the best possible remedies for the economy's woes. "We have a strong foundation in our economy," Bush said in a speech to business leaders in Chicago. "But we can't take economic growth for granted."
Bush pushed Congress to alleviate pressure on high energy costs by allowing for environmentally sensitive oil and gas exploration in the U.S. and opening up to an expanded use of nuclear energy. In addition to his call to make his tax cuts permanent, he called for the permanent elimination of the estate, or "death" tax. The president also trumpeted his administration's plans to keep some homeowners hit by resetting adjustable rate mortgages in their homes amid declining home prices and tight credit markets. Paulson, in a speech to the New York Society of Security Analysts, said the housing correction was "inevitable and necessary," but said the administration's plans to freeze ARMs for five years for some borrowers represented the best remedy for borrowers, lenders and investors in mortgage securities.
"By preventing avoidable foreclosures, we will safeguard neighborhoods and communities, and fulfill our primary responsibility of protecting the broader U.S. economy," Paulson said. "However, let me be clear: There is no single or simple solution that will undo the excesses of the last few years." Paulson said the HOPE NOW alliance of mortgage lenders and borrowers, brought together by the administration, is reaching out to homeowners who will struggle to pay higher rates once ARMs reset, is developing new products to help keep responsible borrowers in their homes and created a streamlined process to "fast track" solutions due to the "unprecedented" volume of resets. The alliance includes more than 90% of the subprime servicing market, including the top 20 subprime servicers, Paulson said. Already, 10% of the 450,000 subprime borrowers the alliance has contacted have responded to see if there was a way to avoid foreclosure. The alliance is now working out details of the implementation plan and expects to begin fast-tracking borrowers in the next few weeks, Paulson said.