THE PRESIDENT: Good morning. On Friday, I traveled to New York City to
talk about the state of our economy. This is a topic that has been a
source of concern for families across America. In the long run, we can
be confident that our economy will continue to grow, but in the short
run, it is clear that growth has slowed.
Fortunately, we recognized this slowdown early, and took action to give
our economy a shot in the arm. My Administration worked with Congress to
pass a bipartisan economic growth package that includes tax relief for
families and incentives for business investment. I signed this package
into law last month -- and its provisions are just starting to kick in.
My economic team, along with many outside experts, expects this stimulus
package to have a positive effect on our economy in the second quarter.
And they expect it to have even a stronger effect in the third quarter,
when the full effects of the $152 billion in tax cuts are felt.
A root cause of the economic slowdown has been the downturn in the
housing market. I believe the government can take sensible, focused
action to help responsible homeowners weather this rough patch. But we
must do so with clear purpose and great care, because government actions
often have far-reaching and unintended consequences. If we were to
pursue some of the sweeping government solutions that we hear about in
Washington, we would make a complicated problem even worse -- and end up
hurting far more homeowners than we help.
For example, one proposal would give bankruptcy courts the authority to
reduce mortgage debts by judicial decree. This would make it harder to
afford a home in the future, because banks would charge higher interest
rates to cover this risk.
Some in Washington say the government should take action to artificially
prop up home prices. It's important to understand that this would hurt
millions of Americans. For example, many young couples trying to buy
their first home have been priced out of the market because of inflated
prices. The market now is in the process of correcting itself, and
delaying that correction would only prolong the problem.
My Administration opposes these proposals. Instead, we are focused on
helping a targeted group of homeowners -- those who have made
responsible buying decisions and could avoid foreclosure with a little
help. We've taken three key steps to help these homeowners.
First, we launched a new program that gives the Federal Housing
Administration greater flexibility to offer refinancing for struggling
homeowners with otherwise good credit histories. Second, we helped bring
together the Hope Now Alliance, which is streamlining the process for
refinancing and modifying many mortgages. Third, the Federal Government
is taking regulatory steps to make the housing market more transparent
and fair in the long run.
And now Congress must build on these efforts. Members need to pass
legislation to reform Fannie Mae and Freddie Mac, modernize the Federal
Housing Administration, and allow state housing agencies to issue
tax-free bonds to help homeowners refinance their mortgages.
Congress also needs to take other steps to help our economy through this
period of uncertainty. Members need to make the tax relief we passed
permanent, reduce wasteful spending, and open new markets for American
goods, services, and investment.
By taking these steps and avoiding bad policy decisions, we will see our
economy strengthen as the year progresses. As we take decisive action,
we will keep this in mind: When you are steering a car in a rough patch,
one of the worst things you can do is overcorrect. That often results in
losing control and can end up with the car in a ditch. Steering through
a rough patch requires a steady hand on the wheel and your eyes up on
the horizon. And that's exactly what we're going to do.
Thank you for listening.
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