Obama urges emergency steps for housing market

By Caren Bohan

ESPANOLA, New Mexico (Reuters) - U.S. presidential candidate Barack Obama urged the Federal Reserve and the Treasury on Thursday to take emergency steps to keep credit flowing to the troubled housing market, saying it would help stem the crisis sweeping financial markets.

"The events of the past few days have made clear that we need to do more right now," the Democratic senator from Illinois told a campaign rally in New Mexico.

"That is why I am calling on the Treasury and the Federal Reserve to use their emergency authorities to maintain the flow of credit, to support the availability of mortgages, and to ensure that our financial system is well-capitalized."

In an effort to free up bank-to-bank lending frozen by the Wall Street upheaval, the Fed made an extra $180 billion available to major central banks to lend to their local commercial banks to get U.S. dollars circulating in overnight and short-term money markets.

The latest move brought to $247 billion the total amount of dollars the Fed was providing to other central banks.

As Wall Street grapples with the worst crisis since the Great Depression, the financial turmoil has become the top theme on the campaign trail where Obama is locked in a tight race with his Republican rival John McCain.

The woes at a series of financial firms such as Lehman Brothers Holdings and American International Group are adding to economic anxiety among Americans already struggling with job losses and declining home values.

In addition to calling for a short-term boost to the mortgage market by the Fed and Treasury, Obama also called for legislation that he said would provide a longer-term remedy to the Wall Street turbulence by giving policy makers better tools for managing problems.

OBAMA URGES ADDING LIQUIDITY

Obama said the legislation would allow for the addition of capital to the financial system and replenishing liquidity to restore the normal functioning of financial markets.

It would also include a proposal he has previously called for that would allow struggling homeowners to restructure their mortgages.

As markets began to melt down on Monday, both Obama and McCain, an Arizona senator, called for a broader overhaul of regulation on Wall Street, including a bolstering of the oversight role of agencies like the Securities and Exchange Commission.

But Obama, who proposed a revamp of financial regulations in a March speech, has accused McCain of being a late convert to stricter market oversight and has mocked him for saying this week that the fundamentals of the economy were strong.

The McCain campaign on Thursday shot back that Obama was exploiting the financial crisis for political gain and "cheerleading" the bad news.

McCain, seeking to cast himself as a reformer and distance himself from fellow Republican President George W. Bush, called for the firing of SEC Chairman Christopher Cox.