Press Gaggle by Tony Fratto

Aboard Air Force One

En Route Jackson, Mississippi

12:02 P.M. EDT

MR. FRATTO: Good morning. We're on our way to Jackson, Mississippi. The President had his normal briefings this morning. At 12:55 p.m. local time he'll attend a Senator Roger Wicker fundraiser, and it's also a Mississippi Victory Committee luncheon. It's at a private residence, and as you know is custom, it will be closed press.

At 3:25 p.m. this afternoon, the President participates in a roundtable on housing counseling with a group called Family Service Agency. I'll come back and say a few words about this group. And that's in North Little Rock, Arkansas.

One note on that. Secretary Preston -- HUD Secretary Preston will meet us in Jackson and travel with us the rest of the day.

At 5:05 p.m., the President attends an Arkansas Victory 2008 reception; private residence in Little Rock, Arkansas. And then we return to the White House at 9:40 p.m. this evening.

A little background on Family Services Agency. You've probably heard us talk a lot about the HOPE NOW Alliance. The Family Service Agency and certain other credit counseling agencies like them existed far before the creation of the HOPE NOW Alliance. They have some affiliation now with the network of the HOPE NOW Alliance, but these are people in local communities who meet face to face with the citizens of those communities to help them with their credit counseling trouble they may have, including problems they may have in keeping up with their mortgage payments.

These are people who want to stay in their houses; they want to clear up their credit histories, get back on a schedule that they can sustain and improve their credit scores, and that kind of thing. So these are people who live in a community, they're there face to face, meeting with people. They've been affiliated with HUD, going back to 1942. There are about 1,700 of these kinds of offices across the country. This is the -- Family Services Agency is one of the largest. Neighbor Works, which is another HOPE NOW Alliance affiliated --

Q: Is it independent, or is it government-run?

MR. FRATTO: It's not government-run, it's independent. It does get some federal dollars. In recent years it's gotten about between $3.6 million and $3.7 million for different programs. But most of the HUD -- million, with an "m" -- this particular organization directly. It also gets funding indirectly through other organizations that might -- where that funding might originate as federal dollars, as well.

The President, in the roundtable, will have an opportunity to sit with a number of the credit counselors, themselves, and the individuals who run this particular office. There will be a homeowner -- one homeowner in the group who will -- so he'll have the opportunity to hear the story of that individual, and we'll have background information for you all in terms of everyone participating in the roundtable later on.

I think that's it. So with that, I'll take your questions.

Q: Well, this is a narrow one to start with, but why just one homeowner? I thought that was part of the point, for him to hear the stories of these folks who are struggling.

MR. FRATTO: Well, it's both. I mean -- and I have no idea why or how many people they tried to reach out to. I think people are naturally somewhat reluctant to talk about their troubled financial history, troubled credit history. It's not the thing that most of us would want to sit around and talk about in public. So I don't know, though, if they tried to get more, or not. But certainly the people who are dealing with troubled homeowners every day are in that room, and those are the people who handle these cases and meet and talk to them. And they can relay the stories of many individuals with credit problems.

Q: Are negotiations proceeding over the break on the housing bill? Is there any progress that's being made that the President plans to talk about?

MR. FRATTO: I can't speak to specific areas of progress, but discussions continue, certainly. And members of the Senate know I think pretty clearly where the President is on this and what our position has been on various elements of housing legislation.

There are parts of the Senate bill that we really like and think are -- would make an important contribution to improving conditions in the housing markets and in financial markets, and so -- the strong oversight of Fannie Mae and Freddie Mac -- so the GSE part we really like. There are other portions of the bill -- FHA modernization -- that we like, although we'd like to see some critical elements added to FHA modernization.

And there are some elements of the bill that we don't like that we'll have to deal with, and some of that is on the financing for the expansion of FHASecure. This $4 billion of funding for CDBG -- block grants -- is something we don't think will contribute to solutions or prevent foreclosures, and in fact, it's funding that actually goes to those holding these foreclosed loans, and that's the original lenders. And we prefer not to be subsidizing lenders. We'd rather try to focus on ways we can help homeowners who want to stay in their homes.

But the Senate will come back. We hope to see that bill come back with some improvements in a way that we can get the President a bill that he can sign.

Q: Are you saying that it needs to be done next week, by the end of next week?

MR. FRATTO: We'd like to see it done as soon as possible. The Senate put off a lot of work. They've been in session for a long time and some very critical pieces of legislation got put off for yet another recess, and now this last session is getting pretty close to the August recess. So the Senate is running out of time to get work done.

And as we know, they put off the Medicare physician payment fix; they put off FISA, which we've been working on for a year now, to try to get long-term legislation; housing has been put off; and we still haven't seen action on other pieces of legislation we think important, like Colombia FTA and some other issues.

So I think they understand that time is running out and they're running short of legislative days and they need to get back to work quickly and try to get these bills to the President.

Q: Germane to that point is that things can get worse this summer before they get better with subprime resets peaking. What else can the administration do? What are you considering?

MR. FRATTO: Well, we've already taken steps on our own to expand FHASecure so that we -- so that FHASecure can go out and reach more troubled homeowners. And so those are -- those administrative changes that we've been able to do are being implemented by Brian Montgomery over at the Federal Housing Administration. They're doing those things. The HOPE NOW Alliance is expanding their network and expanding their reach and dealing with lenders in ways to show how lenders can be -- take a more standardized approach to helping the individuals.

So all of those things continue. All of the initiatives that the administration took are continuing and, in fact, expanding and trying to reach more people. So that will continue.

But there's no question that it is -- we are now approaching a year since the President called on Congress to pass housing legislation. I'll remind you, it was August 31st of last year. It's hard to believe that we've gone 10 months now waiting for Congress to act, from that urgent call that the President made on August 31st of last year to pass FHA modernization, pass GSE reform. And that was the day that he announced the creation of FHASecure.

Now here we are in July of the following year and Congress still has not sent the President legislation that he can sign. So like we -- so, yes, you're right; every day that we wait, the problem gets worse, more people go into foreclosure. We could really use the extra tools and some of the extra authorities that are contained in this legislation. We would really like to see the GSE oversight part of this become law. That would be a major contribution not just to housing, but also to the long-term risk factor for the federal government. So it's -- this is critical legislation, and we need to see them move on it.

Q: And, sir, I'm sorry for hogging, but how concerned, though -- with the stock market tumbling again, the bear market coming close, and then the subprime resets, how concerned is the President that maybe after appearing to have weathered the storm, we could be going into an even more turbulent time?

MR. FRATTO: I'm not going to try to predict the future of markets. There are people out there in the private sector that do that. What we're focused on is trying to improve the economic fundamentals. And you're speaking about one of them -- that's the housing sector, which has an impact not just on financial markets, credit markets, but also on the real economy. People aren't out there buying homes; they're not going out to home improvement stores and buying equipment; they're not hiring people to come and work on those homes; they're not filling those homes with furniture; people aren't building equity up in their homes. So it has ripples that move throughout the economy, and you want to try to stem that as much as possible.

Now, in terms of the President's concern, like I said, he's been speaking about this on a regular basis for well over a year now, about the importance of getting this legislation done so that we can avoid turbulence, so that we can mitigate problems for homeowners out there in the real economy, and for investors out there in the financial sector, so that we can have some stability there and the financial industry can do the job that it does best, which is supplying the funds to help to grow this economy.

Q: Tony, on a different subject, how will the weak dollar impact the President's discussions out at the G8, going into those?

MR. FRATTO: You know we don't talk about the value of the dollar. I think the President commented on it in an interview yesterday. There's always someone who will bring it up, and I'm sure if they bring it up the President will be happy to make them aware of our policy on it.

But, as you know, the G7 -- well, G8 finance ministers met recently. Hank Paulson, who leads our policy on currency, he has spoken to it, as well. And if the President feels that he has something he needs to say, he will.

Q: Tony, do you have any reaction to the report today that -- citing Pentagon officials that Israel is stepping up its plans to attack Iran?

MR. FRATTO: Nothing on that. I'll refer you to the Israelis on that. There's nothing for me to report.

Q: There's an expectation that U.S. auto sales are going to hit a 15-year low. Any reaction to that?

MR. FRATTO: It's a tough time for automakers. I think the changes in -- the slowdown in the overall economy -- we're now in a period of slower growth, and that was going to have an -- that was always going to have an impact on that important sector -- combining that with the very high gasoline prices that we've seen in recent years and, most recently in recent weeks, are causing customers to change the kinds of vehicles that they want to buy. And that means that the automakers are going through a real transition. They're changing their vehicle fleets to try to respond to the tastes of customers out there. And so there's no question it's a tough time, not just for U.S. automakers, but even for foreign automakers making cars in the United States are experiencing some of the same challenges.

Q: I had questions on two other quick topics. What's the reaction from the White House so far about what's happening at the meeting of African leaders? There does not seem to be any kind of public -- doesn't seem to be any kind of public rebuke of Mugabe. Is that the kind of reception -- now that you've had some time to see what's happening, is that the kind of reception that the White House was looking for?

MR. FRATTO: Actually, I really wanted to -- look forward to what happened today out at the AU-EU meeting. I don't have a new report on what was said out there. But I think what you saw yesterday was a number of African leaders who spoke out actually quite forcefully about what was happening in Zimbabwe. And I think, in particular, Ellen Johnson Sirleaf from Liberia was very strong in her remarks, and a number of other African leaders. That alone is a major change for how the African community has traditionally responded to concerns on the African continent. I think Prime Minister Odinga in Kenya also addressed this issue, and he, having recently had to deal with a controversial election, I think has a lot of credibility on that issue, as well.

We'd like to see all leaders in Africa and outside of Africa characterize what is going on in Zimbabwe for what it is, and as the President described in his statement the other day, that it is a sham; it's unfair to the people of Zimbabwe that they don't have the opportunity, through a normal democratic process that is free and fair, to select their leader absent of corruption and intimidation.

We're going to continue to press on it. Secretary of State Rice made it clear that we're going to keep it on the agenda at the U.N. Security Council. And so we'll continue to press on it.

Q: Okay, and one other point. It appears Senator Obama is planning to speak today about carrying on the President's faith-based programs and perhaps expanding it. What's the White House reaction to this support from him, and are you surprised at all?

MR. FRATTO: Yes, I saw those reports. I haven't seen what Senator Obama intends to say. But obviously all of you who've covered the President know how important the faith-based initiative is to him. And you've seen from events that we've had in recent weeks, whether dealing with recidivism in prison or dealing with global health issues like PEPFAR, the contribution that faith-based -- the faith-based community makes here in our country and across the world. If the future potential presidential candidates support it, I think that's something that we all would be very happy about.

Q: Can I ask you one other thing? The White House -- some OMB staffers refused to open e-mails from the EPA over global warming. I realize you guys have not been commenting on this, I believe, but I'd like to ask for comment. And if you can't comment, what would be the legal or other reason for not opening an e-mail? Can you clear that up, at least?

MR. FRATTO: Look, we don't talk about our internal communications on policy matters. I'll just say this: The issue that you're asking about is an advanced notice of proposed rulemaking that the EPA Administrator, Steve Johnson, will soon be publishing and announcing, and we look forward to that. I think it's important to remember what an advanced notice of proposed rulemaking is. It's the agency coming out and saying this is what we intend to consider as we move forward in possibly publishing a rule, and we're going to put this out in the public space so that everyone with a view on this topic can make their views known. Okay?

So if you'd step back 30,000 feet and take a look at what is going on here, what you're seeing is very early in a rulemaking process the opportunity for the public to get involved in making that rule. And so the public will have that opportunity, will have an opportunity to see what the EPA's thinking is. I would expect that you'll also see a lot of views that may be contrary to EPA's thinking, and you'll see other people in support of EPA's thinking. And that's the way we do these things, and we'll see how the process goes forward.

Thank you.

END 12:21 P.M. EDT