Bush says US economy strong despite housing woes

WASHINGTON, Sep 20 (Reuters) US President George W Bush said today that the U.S. economy remained strong, with low inflation and a healthy job market, despite ''unsettling times'' in the housing market.

''The fundamentals of our nation's economy are strong,'' Bush told reporters at a news conference. ''There is no question that there is some unsettling times in the housing market.'' Bush pointed to an unemployment rate at 4.6 per cent, strong corporate profits and growth in US exports as reasons for optimism about the economy even as a housing downturn threatens to drive up foreclosures and crimp consumer spending.

However, Bush added that he would be pessimistic about the state of the economy if Congress raised taxes.

He praised Federal Reserve Chairman Ben Bernanke, two days after the central bank lowered the benchmark US interest rate by a surprisingly large one-half percentage point.

''I think he's doing a fine job,'' he said of Bernanke.

Bush's comments come as Bernanke and Treasury Secretary Henry Paulson testify on the current mortgage market mess before a congressional committee.

Bernanke warned Congress that increasing the size of loans that mortgage finance companies Fannie Mae and Freddie Mac can buy could be problematic and would help only if done swiftly.

Paulson said he was open to temporarily expanding Fannie and Freddie's investments into ''jumbo'' mortgages -- those valued at more than 417,000 dollars -- to ease housing stress, but only with stronger oversight.

REUTERS GT RK2120