Bush says "all options" on table to help economy

WASHINGTON (Reuters) - President George W. Bush on Thursday said he would consider "all options" to help the U.S. economy weather a deep housing slump but the economy was fundamentally strong.

"My view of the economy is that the fundamentals are strong," Bush told a news conference. "Like many Americans, I'm concerned about the fact that Americans see their costs going up. I know Americans are concerned about whether or not their neighbor may stay in their house."

"In terms of further stimulation, we will consider all options," he added.

The housing downturn and a tightening of credit as defaults on U.S. mortgages mounting have led many economists to warn the economy is teetering on the edge of recession.

Former Treasury Secretary Lawrence Summers said on Wednesday the government should step in with temporary tax cuts to counter the economy's ills.

Earlier this month, Bush outlined a plan to help distressed homeowners avoid foreclosures. As many as 1.8 million mortgages with initial starter interest rates are due to reset to sharply higher rates next year.

Under the plan, some homeowners would qualify for a temporary interest-rate freeze, which some critics see as an interference in the functioning of markets.

In an interview with the Wall Street Journal this week, former Federal Reserve Chairman Alan Greenspan said that easing the payments on shaky mortgages might be more damaging than simply giving struggling borrowers money to pay the debt.

Critics have also said the government should not bail out firms that got into overly risky lending and for speculative borrowers.

"On the housing front I made it clear we're not going to bail out lenders and we're not going to help speculators, but we will help credit-worthy people stay in their homes," the president said.

Mounting defaults on U.S. subprime mortgages have led to large losses on Wall Street and a number of investment banks have looked to overseas investors for capital.

Morgan Stanley was the latest, announcing on Wednesday that China agreed to invest $5 billion in the Wall Street firm, which could translate into as much as a 9.9 percent stake. The agreement marks the latest capital infusion by a sovereign wealth fund into a major investment bank hurt by this year's credit crunch.

Bush said he was not opposed to an influx of foreign capital in U.S. firms. He cautioned that U.S. banks need to write down bad assets "now" and he understood the need for them to shore-up their capital.

"My attitude is that Wall Street needs to put it all out there for everybody to see. ... If there are some write-downs to be done they need to do it now," he said. "I'm fine with capital coming in from overseas to help bolster financial institutions."

"I think the world that is open for investment and trade is a world that will lead to overall prosperity," Bush said.

The president also pushed lawmakers to ratify reform of the Federal Housing Administration -- Washington's largest program to promote home ownership -- to allow for larger loan amounts to be made available to borrowers.

Both the House of Representatives and Senate have passed a version of this reform, but differences in these measures will not be ironed out until next year when lawmakers return after the holidays.

(Additional reporting from Patrick Rucker; Editing by Neil Stempleman)