Obama says Bernanke, Paulson eye housing worries

By John Whitesides, Political Correspondent

CAPE CANAVERAL, Florida (Reuters) - Democrat Barack Obama said on Saturday that Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson agreed during their talks this week that stabilizing the housing market was the biggest first step to shoring up the economy.

The Democratic presidential contender said he told both men he favored a second stimulus package to jump-start economic growth, but neither of the economic leaders directly responded.

Obama, an Illinois senator, said their broad talks on Tuesday did not focus on specific proposals, but both men agreed on the difficulties facing a faltering U.S. economy.

"I think they both shared the view that stabilizing the housing market is the most important short-term thing that we can accomplish to get the economy going again," Obama told reporters during a campaign swing through Florida.

Obama met with Bernanke at the Federal Reserve and had a separate telephone conversation with Paulson during two days of meetings in Washington earlier this week to confer with economic leaders and advisers.

Polls show the faltering U.S. economy has become the top issue by a wide margin in the November 4 presidential election battle against Republican John McCain, an Arizona senator.

"I asked both of them what they saw in terms of current economic conditions and what might be around the corner. They both, I think, indicated that the economy was in a difficult state, that the financial markets were still skittish, that credit contractions were still serious," Obama said.

"Obviously, both were concerned about Freddie Mac and Fannie Mae," he said, a reference to the two struggling companies that are the largest sources of U.S. home finance.

Housing legislation recently passed by Congress and signed by President George W. Bush gives Paulson latitude in extending a financial lifeline to the two institutions, and Obama said he urged Paulson to use that latitude to help homeowners.

Obama offered a recast version of his economic recovery plan on Friday that includes an immediate tax rebate of up to $1,000 for low- and middle-income working families to help them deal with rising energy costs and a $50 billion stimulus package -- with half aimed at infrastructure improvements and job protection.

Asked if he had any disagreements with Bernanke or Paulson, Obama said they were careful in their comments.

"I have said publicly that I believe we need a second stimulus package -- they did not respond positively or negatively. I think they kept their cards close to the vest, which is appropriate," Obama said.

(Editing by Vicki Allen)