Bush Says U.S. Economy Sound, People `Concerned' About Housing

``I'm concerned about the fact that Americans see their costs going up,'' Bush said today at a White House news conference. ``I know Americans are concerned about whether or not their neighbor may stay in their house.''

Although the nation's economic ``fundamentals are strong,'' the president said, his administration will ``consider all options'' to prevent a recession. He didn't give any specifics.
The economy has been battered by a slump in housing and a credit collapse caused by losses in the market for subprime mortgages. New York Senator Charles Schumer is among the Democrats in Congress and on the presidential campaign trail who have ripped Bush for what Schumer yesterday called the administration's ``serious mishandling'' of the economy and its response to mounting foreclosures.

Bush pointed to actions already taken to confront the housing slump. He and Treasury Secretary Henry Paulson earlier this month announced a plan negotiated with lenders and regulators to help as many as 1.2 million people keep their homes by freezing rates on some subprime adjustable-rate mortgages. He also signed legislation today to protect homeowners from being taxed on canceled debt when they refinance to head off a foreclosure.
Homeowners

``I made it clear we're not going to bail out lenders, and we're not going to help speculators, but we will help creditworthy people stay in their homes,'' he said.
Bush said he isn't troubled by Wall Street institutions turning to Asian and Middle Eastern governments for $25 billion to prop up balance sheets as they book losses on investments in securities that contain subprime home loans.

Morgan Stanley yesterday wrote down its subprime-infected mortgage holdings by $9.4 billion and received a $5 billion cash infusion from state-controlled China Investment Corp. Citigroup Inc., Bear Stearns Cos. and Zurich-based UBS AG also have received cash infusions from sovereign funds.

``I'm fine with capital coming in from overseas to help bolster financial institutions,'' Bush said today. ``What would be a problem is to say we're not going to accept foreign capital, or we're not going to open markets, or we've become protectionists.''
Subprime Losses

The losses from subprime mortgages are going to ``have to work through the system'' and Wall Street firms must be transparent about investments that have gone bad, he said. ``If there's some write-downs to be done, they need to do it now.''

The U.S. housing recession has slowed U.S. economic growth. The economy probably will slow this quarter to a 1 percent annual rate from a 4.9 percent pace in July to September, according to surveys of economists by Bloomberg News. Fed officials are predicting the expansion will slow to as little as 1.8 percent by the end of next year.

During the news conference, Bush congratulated Congress for finishing work on a ``good energy bill'' and making an adjustment to the tax code to prevent the alternative minimum tax from increasing levies on some 23 million households.

He expressed disappointment that lawmakers passed a measure to fund government operations in a catch-all spending bill. The legislation passed yesterday included funding for 9,800 pet projects of lawmakers, he said.

Florida Bad Credit Mortgage company Five Stars Mortgage provides alternatives to sub prime mortgages for their Florida clients.

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Financial Firms Hunt for cash

As Citigroup Inc. was dealing with billions of dollars in subprime bad credit mortgage-related losses and the departure of Chief Executive Charles Prince, it got an unexpected call from a prominent investment banker suggesting a merger with Bank of America Corp.
Citigroup's board dismissed the informal approach "totally out of hand," and no discussions have taken place, says a person familiar with the matter. "When you're looking for a CEO, that's no time for a transaction," this person says.
Bank of America says it never authorized a formal overture to Citigroup.

Citigroup's board, meanwhile, gave a green light to a smaller transaction -- a $7.5 billion capital infusion from an investment arm of the Abu Dhabi government. In exchange, the Abu Dhabi Investment Authority will receive a 4.9% stake in the form of convertible stock.
More broadly, the Abu Dhabi deal shows that after years of doling out money to corporate clients and consumers, financial companies now need some fresh cash of their own.
Faced with massive losses linked to the subprime-mortgage crisis and accompanying credit crunch, several of the nation's financial institutions -- from Wall Street investment firms to bond insurers -- are assessing their need for new sources of capital. And they are likely to intensify their fledgling efforts in coming months amid signs that they could face billions of dollars in additional losses as the mortgage-market fallout persists.

"It's a bitter pill to swallow to admit that the problems in the market have reached the point that companies that traditionally could fund themselves now need external sources of capital," says David Honold, who invests in financial stocks at Turner Investment Partners in Berwyn, Pa.

Of course, one way to tap external capital is to merge operations. The merger boom that fizzled out this summer was driven by cheap and plentiful financing in the debt markets and a booming stock market. With credit increasingly tight and the stock market looking shakier, Wall Street may now see a round of opportunistic deal making.

Bank of America, based in Charlotte, N.C., has long been one of the most opportunistic acquirers in the banking industry. In the past couple of years, it has scooped up retail bank FleetBoston Financial Corp., credit-card issuer MBNA Corp., wealth-management firm U.S. Trust Co. and, most recently, LaSalle Bank.

This wasn't the first time Citigroup received an overture involving Bank of America; it got a feeler from the bank several months ago, according to a person familiar with the matter. The latest one, though, was quickly disavowed. "Bank of America did not authorize any investment banker to approach any company over the last six weeks," a Bank of America spokesman said.