Bush Rules Out Any Federal Bailout for Homeowners
President Bush said Thursday concern should be shown those who've lost their homes but it's not the federal government's job to bail them out.
"Obviously anybody who loses their home is somebody with whom we must show an enormous empathy," Bush said. Asked whether he would champion a government bailout, Bush responded: "If you mean direct grants to homeowners, the answer would be `No, I don't support that.'"
New home foreclosures have climbed to record highs. Homeowners with poor credit have been hardest hit as higher interest rates and weak home prices have made it impossible or difficult for them to keep up with their home loans.
In a wide-ranging news conference at the White House, the president also said that he's interested in exploring the possibility of providing tax relief to U.S. corporations. He has acknowledged that such a move would face challenges in the Democratic-controlled Congress, and he insisted it needed to be structured in a way as to not worsen the government's balance sheets.
"We're at the very early stages of discussion," Bush said. "Anything that would be submitted to Congress ... would have to be revenue-neutral."
A Treasury Department study, released earlier this year, showed the federal corporate tax rate could be cut from 35 percent to 27 percent with the same amount of revenue collected if a number of corporate tax breaks were eliminated, thereby broadening the tax base.
However, such a move would likely trigger a firestorm of protest as various groups would seek to protect popular tax breaks such as the research and development credit.
"What we'd really be talking about is a simplification of a very complex tax code that might be able to lower rates," the president explained. "However, I would readily concede to you that this is a difficult issue."
Bush said that the reason there are tax preferences is because "there are powerful interests that have worked to get the preference in the code."
Sen. Byron Dorgan, D-N.D., called Bush's interest in a corporate tax cut irresponsible given the government's rising debt. "It's hard to make a case that large U.S. corporations are paying too much in income taxes," Dorgan said.
Treasury Secretary Henry Paulson _ the Bush administration's point person on the matter _ discussed the corporate tax matter with Bush on Wednesday. Paulson last month had convened a one-day conference at the department, where there seemed to be widespread agreement among participants _ private economists and executives _ that the current system was hurting America's ability to compete against other nations which have lower corporate tax rates.
After a five-year boom, the housing market sank into a slump last year, depressing home sales and weakening once-lofty home prices. A combination of higher interest rates and weaker home values clobbered some borrowers, leaving them in some cases with costly mortgages that exceeded that value of their homes.
Worries that problems in the housing and mortgage markets will spread, sent stocks tumbling on Thursday. The Dow Jones industrials closed down 387.18 points.
Bush said that he does support financial institutions working with distressed homeowners. He also suggested that some people may not have fully understood the terms of their mortgages. The government, he said, can help out by educating prospective home buyers.
Analysts estimate that nearly 2 million adjustable-rate mortgages will reset to higher rates this year and next. Some higher-risk "subprime" borrowers were lured by initially low "teaser" rates offered during the housing boom. But those teaser rates can spike upward after the first few years, causing payment shocks.
Loose lending standards, including allowing borrowers to get mortgages with little documentation, contributed to the problems. Federal regulators have taken some steps to address problems, and Congress is also looking into possible action.
Some Democrats like the idea of easing investment limits on mortgage giants Fannie Mae and Freddie Mac to bolster the distressed mortgage market.
Bush wasn't warm to the idea.
"Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options," he said.