Published February 3, 2009

Some banks could still fail, Obama warns

US president pushing banks that are getting aid to lend more to business, consumers

	Email this article
	Print article
	Feedback

(WASHINGTON) A stark warning by Barack Obama is demonstrating that the new American president is far from being lulled by the efforts so far to rescue the US financial system.

In an NBC television interview that was taped on Sunday, he said some of America's troubled banks could still fail. The government's bailout plan, he said, was not going to save every US bank.

'It is likely that the banks have not fully acknowledged all the losses that they're going to experience. They're going to have to write down those losses. And some banks won't make it,' Mr Obama said.

The US president said that he was taking full responsibility for rescuing the US economy, which is facing its worst downturn in 80 years.

'If I don't have this done in three years then there's going to be a one-term proposition,' Mr Obama said, already looking forward to the 2012 presidential election.

In another major pronouncement of his new presidency, he said he would set up an independent board to review the government's messy US$700 billion financial bailout programme.

Administration officials, the Federal Reserve and top banking officials are working on proposals on how the government will use the last US$350 billion from the US$700 billion rescue programme, with some lawmakers clamouring for greater oversight.

But the president demurred when asked if he planned to set up a so-called 'bad bank' plan, under which the federal government would take on the bad debts and investments of financial institutions. He suggested, however, that something like that was in the works, and that American taxpayers would become owners of stock in those banks and investment houses. 'Over time, as the market confidence is restored, then what we can do is start getting rid of these assets, some of the stocks that taxpayers now have in some of these companies start being worth more,' he said.

In a separate TV interview on Sunday, House Financial Services Committee chairman Barney Frank said that Mr Obama will require banks receiving government aid to lend more to businesses and consumers, saying the Bush administration 'made a mistake' by not setting stricter rules for institutions getting funds from the financial-rescue package.

'I think you're going to see the Obama administration, having learned from that, push for much more lending,' Mr Frank said on Sunday on ABC's This Week. 'There are going to be some real rules in there.'

Mr Frank and other Democrats have faulted the Bush administration for not setting restrictions on banks that got capital injections from the first US$350 billion instalment of funds Congress released in October.

Mr Obama said he was confident Republicans eventually would support a final version of the legislation, which he said would save or create 3-4 million jobs.

Every Republican in the House of Representatives voted against the measure in a vote last week in the lower house. The Senate began debating its version of the measure yesterday.

'I am confident that by the time we have the final package on the floor that we are going to see substantial support, and people are going to see this is a serious effort. It has no earmarks. We are going to be trimming out things that are not relevant to putting people back to work right now,' Mr Obama said.

Senators from both parties signalled a readiness on Sunday to negotiate, particularly on Republican proposals aimed at reinvigorating the housing market.

If the stimulus plan is to survive a Senate vote, Mr Obama will need Republican support because his fellow Democrats do not yet hold the 60 seats needed to overcome a Republican filibuster - a parliamentary move that would keep the plan from going to a vote. -- AP, Bloomberg