Obama meets Bernanke to discuss economy

WASHINGTON (Reuters) - Democratic presidential candidate Barack Obama met Federal Reserve Chairman Ben Bernanke on Tuesday afternoon to discuss the U.S. economy and how to bolster it.

The Illinois senator, who focused his campaign on the economy this week after a trip abroad last week, met with Bernanke at the Federal Reserve for about 40 minutes on Tuesday afternoon after speaking with Treasury Secretary Henry Paulson by telephone in the morning.

Obama spokeswoman Jen Psaki said the Democratic candidate planned to use the meeting with Bernanke to discuss "the economy and plans going forward."

An adviser said Obama wanted to talk with Bernanke about the U.S. housing crisis and what he saw as the need for tighter financial regulation and more fiscal stimulus to boost the economy.

Obama wanted the Fed chairman to give him "an update on where the economy is and where it's going," the adviser said, and was "not there to tell Bernanke how to do his job."

The faltering U.S. economy has become a top issue in the November 4 election contest with Republican John McCain.

Obama reminded Paulson in a phone call earlier that he supported housing legislation passed by Congress last week and now awaiting President George W. Bush's signature.

The measure gives the Treasury secretary wide discretion, and Obama urged him to use that discretion to help homeowners and not bail out lenders, Obama's Senate spokesman, Michael Ortiz, said in a statement.

"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 modernize our regulatory structure to avoid these problems in the future and protect average Americans," Ortiz said.

A Treasury Department spokeswoman said there would be no comment on the phone call with Paulson. The Federal Reserve had no comment on the Obama-Bernanke meeting.

McCain spokesman Taylor Griffin said the Arizona senator "regularly consults with a range of experts including Bernanke and Paulson and has done so for years."

"Barack Obama's confused economic plans make it clear that he lacks experience on economic issues and has a great deal to learn," Griffin said. "Hopefully his meetings will help him to understand that raising taxes in a slowing economy is a sure way to kill jobs."

Obama organized the sessions with Bernanke and Paulson last week as he was traveling overseas because he kept seeing bad economic news from home, an adviser said. Obama's trip took him to Afghanistan, the Middle East and Europe.

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Obama met in Washington on Monday with an all-star group of business and economic experts, including billionaire investor Warren Buffett, who participated by telephone, former Federal Reserve Chairman Paul Volcker and Google Chairman Eric Schmidt.

Obama expressed confidence in Bernanke during an interview with Reuters on Saturday, saying he had made some good decisions in difficult circumstances.

In a move that some criticized as a bailout, the Fed came to the rescue of investment bank Bear Stearns by helping to broker its takeover by J.P. Morgan Chase. The Fed and Treasury also offered a financial lifeline to mortgage giants Fannie Mae and Freddie Mac.

The moves marked an expansion of the Fed's role in the financial system that has made some wary.

But Obama said he did not want to second-guess the central bank.

"I think it's very hard to second-guess every single decision that has been made because this is a huge, complex economy and the Fed is just one actor among many who have enormous influence on the U.S. economy or for that matter the global economy," he said.

Bernanke's term as head of the U.S. central bank ends in January 2010 and the next president, who will take office in January 2009, will decide whether to nominate him for another term.

(Editing by David Alexander and David Wiessler)