Bush: Economy facing 'tough times'

President Bush acknowledged that the economy was in "a rough patch" but that acting too aggressively could have "far-reaching and unintended consequences."

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NEW YORK (CNNMoney.com) -- President Bush acknowledged Friday that the country was facing plenty of challenges both within the housing and financial markets, but stressed he was confident the economy would recover.

Speaking before The Economic Club of New York, Bush said he had witnessed these "tough" economic times in his administration before, adding that government action taken so far including the recent economic stimulus package would provide some much needed help.

"I believe we are a resilient economy," he said.

Bush's remarks come as the nation's financial struggles, brought about by the ongoing credit crisis, show few signs of abating.

Americans consumers now face a weaker dollar, soaring prices for food and gasoline and the latest indicators suggest that the housing market only has further to fall.

In February, foreclosure filings skyrocketed 60%. Homes sales are near record lows and home prices continued to plunge throughout 2007 according to the latest statistics.

At the same time, there are signs that the economy is not in shambles - exports are at record highs and unemployment still remains relatively low.

The President acknowledged that many Americans are now in a difficult position, but he also stressed that the $170 billion stimulus package passed by Congress last month would help spur growth, adding that the checks should be in the mail by the second week of May.

"Fortunately we recognized the slowdown early and took action," he said.

Under the plan millions of Americans will receive one-time tax rebates. Businesses will get temporary tax breaks and homeowners will get help with securing or refinancing mortgages in in higher cost markets.

More action, but not too much

There was also encouragement by the President to take additional action to help alleviate the woes resulting from the housing crisis. He called on Congress to reform the government-sponsored enterprises Fannie Mae (FNM) and Freddie Mac (FRE, Fortune 500). He also pushed lawmakers to modernize the Federal Housing Administration and to extend tax cuts on capital gains and set to expire in the coming years.

"If they don't act they will create additional uncertainty in an uncertain time," Bush said.

But Bush also took aim at some proposed housing bailout measures, warning that acting too aggressively could result in "far-reaching and unintended consequences."

There are perhaps a dozen different plans floating around Washington, D.C., sponsored by senators, congressmen, regulators, Wall Street banks as well as various community advocacy groups.

He specifically attacked plans for state and local governments to buy abandoned and foreclosed homes, arguing that it would only benefit lenders and speculators.

He also rallied against other proposals including one that would give judges authority to rework mortgages of homeowners in bankruptcy.

"The temptation is for people to put bad law in place," he said.

On Friday, Bush reiterated his support for the Hope Now initiative, which calls for lenders to voluntarily rework at-risk loans without using government funds. But critics contend that the alliance isn't doing enough to help at-risk mortgage borrowers.

Plenty of support

At a time when financial markets have been on edge about both the health of the economy and state of the credit markets, President Bush threw his support behind the two policymakers - Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke - who have attempted to shepherd the economy and financial markets through this difficult period.

"Today's events are fast moving but the Chairman of the Fed and the Secretary of the Treasury are on top of them and will take appropriate steps to promote stability in our markets," said Bush.

Speaking before the National Community Reinvestment Coalition Friday, Bernanke promised to do whatever possible to help stem the tide of foreclosures nationwide.

"I hope I have conveyed today that the Federal Reserve is strongly committed to fully employing our authority, expertise, and resources to help alleviate their distress," he said in prepared remarks.

Since September the Federal Reserve has enacted a number of measures to keep the economy from tipping into a recession including providing liquidity to tight credit markets and drastically cutting interest rates. The central bank is expected to cut rates once again at next week's policy meeting.

Earlier this week, Paulson delivered a series of proposals aimed at restoring faith in the mortgage business and shoring up the battered financial services sector.

Major U.S. financial institutions have suffered billions of dollars in losses throwing the financial markets into disarray, adding to speculation that the economy is, in fact, in a recession.

Among the biggest points of the plan Paulson were establishing a nationwide licensing standard for mortgage brokers and stiffer rating standards for credit rating agencies, which have borne some of the blame for the credit crisis by not warning investors who bought subprime mortgage securities.

Bush capped his remarks by stressing the importance of leaving U.S. markets open to overseas trade and capital, saying that not doing so would harm the economic future of the country.

"It is dangerous for a country to be isolationist and protectionist," Bush said.