Bush says markets have enough 'liquidity' to adjust

WASHINGTON, Aug 9 (Reuters) President George W Bush said today that US economic fundamentals were strong despite a housing downturn and there was sufficient liquidity for markets to adjust.

Echoing comments he made a day earlier, Bush said low inflation, a strong job market and global economic growth were helping to support the US economy.

''The fundamentals of our economy are strong,'' Bush told reporters. ''I'm told there is enough liquidity in the system to enable markets to correct.'' Bush did not directly address Thursday's turbulence in global financial markets after French bank BNP Paribas froze payments on three funds exposed to the US subprime mortgage sector, sparking fears of a possible credit squeeze.

European stock markets fell sharply, and US stocks also tumbled in early trade before paring gains by late morning.

Bush also said Congress should reform Fannie Mae and Freddie Mac before the mortgage finance companies step deeper into the mortgage market.

Fannie and Freddie have pushed their federal regulator to lift a cap on their investments so that they can buy more loans, a proposal that has gained some support from Democrats including New York Sen. Charles Schumer.

''First things first when it comes to those institutions,'' Bush said. ''Congress needs to get them reformed. Get them focused and then I will consider other options.'' REUTERS AE BST2133