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WASHINGTON: White House hopeful Barack Obama discussed the US housing crisis on Tuesday with Treasury Secretary Henry Paulson and Federal Reserve chief Ben Bernanke as the Democrat stepped up a campaign offensive on the economy.
The top administration officials have been overseeing efforts to rescue the stricken housing market and prop up enfeebled banks and mortgage lenders, whose financial troubles are threatening to spill over to the wider economy.
Obama said he pressed Paulson in telephone talks to ensure that government-backed bailouts of mortgage finance giants Fannie Mae and Freddie Mac help hard-pressed homeowners rather than managers and shareholders.
"Senator 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," said a statement issued by Obama's Senate office.
"The two men agreed that Washington must restore confidence in Fannie Mae and Freddie Mac in a way that protects the taxpayer and our financial system, and that we must reform and modernise our regulatory structure to avoid these problems in the future and protect average Americans," it said.
New legislation provides some 3.9 billion dollars to help local governments buy and rehabilitate foreclosed homes, and permanently boosts the dollar limit for mortgages that can be repurchased by Fannie and Freddie.
It also reforms the oversight of Fannie and Freddie, massive government-sponsored businesses to support home finance that have a congressional charter but are owned by shareholders.
The federal rescue plan, which is set to be signed into law by President George W. Bush this week, is aimed at tackling housing and credit squeezes that have imperiled the world's largest economy.
Obama also met Bernanke in person during a stop in Washington, and said he "made clear his respect for the independence of the Federal Reserve System and the special importance of its role during periods of economic uncertainty."
"He asked what Congress and the president can do to help the economy in the short-term while improving our country's prospects for long-term, bottom-up economic growth and job creation," according to another statement.
"He commended Chairman Bernanke for the steps the Fed has taken against predatory lending, and thanked him for his leadership at this critical time."
Obama has made the faltering US economy the centrepiece of his campaign message since returning from a much-acclaimed foreign tour at the weekend.
In a meeting on Monday with top economic advisers, Obama said the economy was now in the grip of an "emergency" that required short-term aid to consumers and longer-term action to retool both Washington and Wall Street.
But as voters reel from job losses, home seizures and rocketing fuel prices, the rival campaign of Republican John McCain said Obama's economic plan would serve only to plunge the United States into a 1930s-style depression.
Campaigning in Nevada Tuesday, McCain hit out at Obama on the economy, Iraq and offshore oil drilling.
"Senator Obama says he's going to change Washington but his solution is to simply make government bigger and raise your taxes to pay for it," the Arizona senator said.
"We've been doing that for years, my friends, and it hasn't worked."
Whoever wins November's election, the next president may find his room for manoeuvre on the economy restricted after the White House predicted the budget deficit would balloon to a record 482 billion dollars in the next fiscal year.
Officials at the Treasury and Fed declined to comment about the Obama contacts. - AFP/de
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