[Updated at 12:25 p.m.] President Obama was asked about his thoughts on the Islamic center being built near ground zero in New York.

"All men and women are created equal, they have certain inalienable rights, and one of those is to practice their religion freely," Obama said. "You can build a church on a site, you can build a synagogue on a site, if you could build a Hindu temple on a site, you should be able to build a mosque."

Obama said he recognized the sensitivity in the area because of the 9/11 attacks and acknowledges that family members are continuing to experience pain and anguish over their losses.

However, he urged people to remember who our real enemies are.

"We are not at war against Islam. We are at war against terrorist organizations that have distorted Islam or falsely used the banner of Islam," Obama said. "If we're going to deal with the problems Ed Henry was talking about - reducing the terrorist threat - we need all the allies we can get."

Obama pressed that in fact, the anti-Islam sentiment and a war between the West and Islam is exactly what terrorist organizations are hoping for.

"Al Qaeda,  that's what they've been banking on," Obama said. "The overwhelming majority of Muslims are peace-loving - are interested in the same things that you and I are interested in."

Obama stressed it is important that Americans do not believe the entire religion of Islam is offensive.

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[Updated at 12:17 p.m.] CNN's Ed Henry asked President Barack Obama whether he still agrees with his statement that it is crititical to capture Osama bin Laden and if he views it a failure that he hasn't been captured, despite Obama's promise to run a smarter war on terrorism than President Bush.

"I think capturing or killing bin Laden ... would be extremely important to national security," he said. "It doesn't solve all of our problems, but it is a high priority for our administration."

Obama touted success in forcing members of al Qaeda to retreat because of ramped up pressure on its leaders.

"They have been holed up in ways that have made it harder for them to operate - and part of what's happening is bin Laden has gone deeper underground," Obama said. "We have the best minds, the best intelligence officers, the best special forces who are thinking about this day and night, and they will continue to think about it day and night as long as I'm president."

[Updated at 12:07 p.m.] Obama said that although he has missed the deadline to close the prison at Guantanamo Bay, "it is not for lack of trying."

"It's because of politics," he said.

He insisted that he believes the U.S. justice system is capable of handling procedures involving terrorist suspects and that military tribunals are not necessary.

"I am absolutely convinced that the American justice system is strong enough, that we should be able to convict people who murdered innocent Americans and that carried out terrorist attacks against us," he said. "We should be able to lock them up and make sure they don't see the light of day. We can do that, and we've done it before."

[Updated at 12:00 p.m.] Obama acknowledged that the looming expiration of Israel's moratorium on settlement construction is a "major bone of contention."

The internal politic pressures for Israeli Prime Minister Benjamin Netanyahu on this issue "are very difficult," Obama said.

Palestinian President Mahmoud Abbas and Netanyahu have to figure out "how to help each other succeed," he added.

[Updated at 11:58 a.m.] Obama was asked about levels of corruption within the Afghanistan government and what is being done to curtail it.

"We are in the midst of a very difficult but very important project. I just want to remind people why we're there, the day before September 11. We're there because that was the place where al Qaeda launched an attack that killed 3,000 Americans. And we want to make sure we dismantle al Qaeda and that Afghanistan is never again used as a base for attacks against Americans and the American homeland."

Obama asked people to remember that Afghanistan is the second poorest country in the world and that change won't happen overnight, but his administration is working with Afghan President Hamid Karzai.

Obama criticized former President George W. Bush's administration for failing to provide adequate training of Afghan military forces.

"After seven years of policies in which we weren't even effectively training security forces, we're saying we're going to work with the Afghan government so they can be responsible for their own security. We're going to promote a political settlement in the region that can help to reduce the violence. We're going to encourage an Afghan government that can deliver services for its people."

He insisted that progress has been made in terms of rooting out corruption from the government in Kabul, but "we're a long way from where we need to be on that," he said.

The White House will continue to pressure Karzai on the issue of corruption, Obama said.

[Updated at 11:52 a.m.] Obama said that a proposed settlement for black farmers - who have historically been the target of racial discrimination by the federal government - is "fair" and "just."

The White House will continue to make funding of the settlement - now blocked in the Senate - "a priority," he said.

[Updated at 11:51 a.m.] Obama insisted Friday that skyrocketing medical costs will ultimately decline as more people are covered due to his administration's health care reform initiative.

[Updated at 11:44 a.m.] Obama was asked about Pastor Terry Jones in Florida, who had plans to burn Qurans on the anniversary of the September 11 attacks, and whether he was concerned that by having the secretary of defense call him, it was actually elevating his platform.

"The idea that we would burn the sacred texts of someone else's religion is contrary to what this country stands for. It's contrary to what this nation was founded on. My hope is that this individual prays on it and refrains from doing it," Obama said. "But I'm also commander in chief, and we are seeing today riots in Kabul, riots in Afghanistan, that threaten our young men and women in uniform, and so we have an obligation to send a very clear message that this kind of behavior or threats of action put our men and women in danger."

Obama said he doesn't think his administration is what elevated this story, but "in the age of the internet, this is something that can cause us profound damage."

"It's also the best imaginable recruiting tool for al Qaeda," he said. "We don't start having a bunch of folks all across the country think this is how to get attention. This is a way of endangering our troops. You don't play games with that."

[Updated at 11:40 a.m.] Obama conceded Friday that there are "enormous hurdles" to the new Middle East peace talks. His administration understood that "it was a risk for us to promote these discussions, but it is a risk worth taking," he
said.

It is in the interests of America, the Israelis and the Palestinians to reach a comprehensive settlement, Obama said. The issue of Middle East peace must be dealt with if, among other things, Israel is to remain both Jewish and Democratic, Obama said.  A settlement would also help the United States deal with Iran.

"If these talks break down, we're going to keep on trying," he said.

[Updated at 11:34 a.m.] Obama was asked about why he believes that nine years after the attacks on September 11, 2001, there is now a growing suspicion and resentment of Islam.

"I think that at a time when the country is anxious generally, and gone through a tough time, then you know fears can surface, suspicions, divisions can surface in a society, and so I think that plays a role," Obama said.

Obama then praised former President George W. Bush for his specific rhetoric on religion following the attacks.

"One of the things I most admired about President Bush was after 9/11, him being crystal clear about the fact that we were not at war with Islam, we were at war with terrorists and murderers who had perverted Islam ... to carry out their acts."

Obama said he was proud the country had rallied around the idea that we can't be divided because of religion or ethnicity - and hopes that is something that can continue.

"We are all Americans, we stand together," Obama said. "I think it is absolutely important now for majority of Americans to hang onto that thing that is best in us: a belief in religious tolerance. We have to make sure we don't start turning on each other."

"We are one nation under God. We may call that God different names, but we are one nation."

[Updated at 11:32 a.m.] Obama said Friday that one of the reasons he hasn't created a greater spirit of cooperation in Washington is because some GOP leaders decided when he took office that "we're going to sit on the sidelines and let the Democrats solve" the economic crisis.

Taking on tough issues with entrenched special interests creates "a lot of big fights," he said.

[Updated at 11:25 a.m.] Obama deflected a question Friday about whether his new economic plans should be referred to as another "stimulus" package. "Everything we've been trying to do is designed to stimulate growth," he said.  "I have no problem with people saying the president is trying" to do that.

He was then asked about several pending Senate nominations - including judges and Homeland Security officials.

"I'm concerned about all Senate nominations these days," he said, noting he wasn't making a joke. "I've got people who have been waiting for six months to get confirmed that nobody has an official objection to ... and I can't get a vote on them."

Obama said it was frustrating when "you've got a determined minority" that is attempting to filibuster all of his nominations.

"They're just playing games," he said.

[Updated at 11:20 a.m.] President Obama was asked about why he waited so long to introduce his latest economic policies and if they are merely being used as a political weapon for the election season.

"We have this notion that we waited until now, but just on the small business issue alone, we have cut taxes for small businesses eight times," Obama said. "So we are hardly Johnny-come-latelys on this issue."

Obama touted a variety of  policy successes as the reason the economy is better than it was when he took office.

"When you put all the things we did together, it made a difference," he said.

[Updated at 11:19 a.m.] Obama said there is room for discussion on competing tax plans.

"If the Republican leadership is prepared to get serious ... I would love to talk to them," he told reporters at the White House.

Obama insisted, however, that GOP plans to extend the Bush tax cuts for individuals earning over $250,000 are a bad idea.

[Updated at 11:13 a.m.] A reporter asked Obama about his assertion that Democrats wouldn't do well in the midterm elections in November if it would be a referendum on the economy.

"For 19 months we have steadily worked to avoid a depression, to take an economy that was contracting and making it grow again," Obama said. "But we're not there yet."

Obama acknowledged Americans' anger about the slow progress.

"And because I'm the president and the Democrats have controlled the House and the Senate, it's understandable that people are saying 'what have you done?' "

However, Obama said, the Republicans don't offer a better solution - in fact, their policies are worse.

"The Republicans' offers are exactly the ones that got us into this trouble," he said. "If you want the same kind of skewed policies that led us to these problems, the Republicans are ready to do that."

[Updated at 11:11 a.m.] Obama announced that Austan Goolsbee will be named chairman of the White House Council of Economic Advisers.

Goolsbee will replace Christina Romer, who stepped down this month as chair of the council, a panel of three White House officials who offer the president economic advice and help formulate policy.

[Updated at 11:08 a.m.] Obama on Friday once again urged the Senate to pass his small business jobs bill, arguing that it has been blocked by "a partisan (Republican) minority."

Obama praised Sen. George Voinovich, R-Ohio, for announcing that he would not help GOP leaders block the bill.

[Updated at 11:02 a.m.] Obama said the goal of his latest proposals is to help jump-start an economy still dealing with the impact of the recession.

"Even though the economy is growing again ... the hole the recession left has been huge," Obama said.

"Millions of Americans are still looking for work."

He touted his administration's investments in infrastructure as a chance to remain competitive with other countries that are working on similar projects including high-speed rail.

[Posted at 10:50 a.m.] President Obama will hold a press conference at 11 a.m. Friday, his first full-scale question-and-answer session at the White House in nearly four months and his seventh full-scale news conference at the White House since he took office.

The last presser was back in May when the president answered questions mainly about the oil spill. This one is expected to focus on the economy.