Bush Prods Congress On Mortgage Giants

President George Bush urged lawmakers on Tuesday to move quickly in putting into force legislation designed to help prop up mortgage giants Fannie Mae and Freddie Mac while declaring the U.S. financial system to be "basically sound."

He also called on the Democratic-run Congress to follow his example and lift a ban on offshore drilling to help increase domestic oil production.

"I readily concede it won't produce a barrel of oil tomorrow, but it will reverse the psychology," Mr. Bush told a White House news conference - his first since late April.

CBS News correspondent Mark Knoller reports it was the president's 43rd full-length, solo, White House news conference.

It was an attempt to quiet fears about the economy, reports CBS News correspondent Bill Plante. It's no coincidence that it came on the same day Federal Reserve Chairman Ben Bernanke was testifying before the Senate banking committee. The administration is very concerned about what has happened, particularly about the public perception.

President Bush said the two troubled Freddie Mac and Fannie Mae mortgage companies play a central role in the U.S. housing-finance system and that government action to help them were not bailouts, since the two would remain shareholder-owned companies.

"I don't think the government ought to be involved in bailing out companies," the president said.

Amid soaring fuel prices, the toughest real estate market in decades, falling home prices and financing that's harder to come by, Mr. Bush said: "It's been a difficult time for many American families." But he also said that the nation's economy continues to grow, if slowly.

The president said that despite the woes of Fannie Mae and Freddie Mac and the recent government takeover of California bank IndyMac, U.S. depositors should not worry because their deposits are insured by the government up to $100,000.

"If you're a depositor, you're protected by the federal government," Mr. Bush said.

The Bush administration and the Federal Reserve announced an emergency rescue plan Sunday to bolster Fannie Mae and Freddie Mac, which hold or guarantee more than $5 trillion in mortgages - almost half of the nation's total.

The plan would temporarily increase a long-standing Treasury line of credit that could be provided to either company. Treasury also said it would, if necessary, buy stock in the companies to make sure they have enough money to operate.

The Fed also announced that it would allow Fannie and Freddie to get loans directly from the Fed - a privilege previously granted only to commercial banks until this March, when the Fed extended the borrowing to investment banks to deal with the collapse of Bear Stearns.

At the same time, a housing package was heading toward final congressional passage. It would modernize the Federal Housing Administration and create a new regulator and tighter controls for Fannie Mae and Freddie Mac.

It's this legislation that Mr. Bush urged Congress to pass as soon as possible.

Congress could move as early as this week on the housing legislation to send it to Bush. First, though, House and Senate leaders must strike a deal in consultation with Treasury Secretary Henry Paulson to resolve key differences so Bush, who has threatened to veto the measure, will sign it.

"I think the system basically is sound, I truly do," President Bush said. "I understand there's a lot of nervousness. The economy is growing. Productivity is high. Trade's up. People are working - it's not as good as we'd like. And to the extent that we'll find weakness, we'll move."

The president defended his insistence that the U.S. economy was not in a recession, even though many economists believe it is.

He said the traditional definition of a recession - two quarters in a row of negative growth - had not been met.

"I'm not an economist, but I do believe we're growing," he said. "I'm an optimist. I believe there's a lot of positive things for the economy."

He acknowledged, however, that "it's not growing as it should."

On Capitol Hill, Bernanke warned that inflation seemed likely to move even higher and economic growth would be "appreciably below its trend rate."

"In general, healthy economic growth depends on well-functioning financial markets," Bernanke said. "Consequently, helping the financial markets to return to more normal functioning will continue to be a top priority," he said.

Mr. Bush acknowledged it could take years before opening the Continental Shelf to oil drilling would result in increased U.S. production. But, he said, at least it would put the nation on the right track toward reducing its reliance on imported oil.

"There is no short term solution," Bush said. "The president doesn't have a magic wand. You can't just say, 'Low gas."

It would take a long time for the drilling to have an impact, CBS News correspondent Bob Schieffer reports, and there's no chance that the Congress is going to do it. The Democratic rank-and-file has been a little more receptive to resuming offshore drilling, but the Democratic leaders in Congress are just flat-out against it.

Asked about his comment earlier this year that he hadn't heard of $4 gasoline, Bush said: "I've heard of it now."