Page last updated at 22:20 GMT, Monday, 2 February 2009

Obama predicts more bank failures

President Barack Obama
Barack Obama said the nation's banks were in a very vulnerable position

US President Barack Obama has warned that more US banks are likely to fail, as the full extent of their losses in the economic crisis becomes clear.

Speaking to NBC News, Mr Obama said "some banks won't make it" but stressed that people's deposits would be safe.

He has asked Treasury Secretary Timothy Geithner to draw up guidelines for banks receiving taxpayers' money.

Meanwhile, he warned of a "difficult next few days" as the Senate begins to debate his $800bn (567bn) rescue plan.

Taking responsibility

In an interview with NBC, Mr Obama said it was likely the banks had not yet fully acknowledged the extent of their losses.

"The banks, because of mismanagement, because of huge risk-taking, are now in a very vulnerable position," he said.

"We can expect that we're going to have to do more to shore up the financial system."

What we can't do is let very modest differences get in the way of the overall package moving forward quickly
President Barack Obama

The president, who has been critical of bank executives receiving bonuses despite taking government bail-outs, also announced there would be new rules for such banks.

"If a bank or a financial institution is getting relief then they've got to abide by certain conditions," he said.

The president made it clear he was taking responsibility for turning round the US economy before the next presidential election in 2012, saying he could expect only one term in office if it was not fixed in the next three years.

The interview was short on details, with the president declining to comment on whether he planned to create a "bad bank" to buy toxic assets from other financial institutions.

He said he did not want to pre-empt an announcement planned for next week.

'Considerable unrest'

The president and Vice-President Joe Biden are due to meet congressional leaders later on Monday to encourage them to move forward on the $800bn economic stimulus package.

Mr Obama said he was confident that Republicans would be able to support the final version of the legislation, although it passed in the House of Representatives without a single Republican vote.

I think there is a bipartisan feeling that this is not the way to get the economy moving
Mitch McConnell
Republican Senate leader

He acknowledged that the two parties were not agreed on all aspects of the plan.

"But what we can't do is let very modest differences get in the way of the overall package moving forward quickly," he said.

It is unlikely that it will be able to pass the Senate without Republican support because the Democrats do not have the majority that they would need to vote down any potential delaying tactics.

As debating began in the Senate, leader of the Republicans in the chamber, Mitch McConnell, signalled his intention to oppose the bill - saying that even members of Mr Obama's own party were not happy with the proposals.

"There is considerable Democratic senatorial unrest about this package," he said.

"I think there is a bipartisan feeling that this is not the way to get the economy moving. And hopefully we'll see that exhibited on various amendments where we may have some bipartisan success in modifying the bill."

The Democrat leader in the Senate, Harry Reid, said he hoped the measures would be approved by the end of the week.

Gloomy figures

Mr Obama's comments came as fresh official data indicated the problems facing the wider US economy show no signs of lessening.

The Treasury Department announced it would need to borrow $493bn in the first three months of this year.

The figure is a record amount for the January-March period, but is smaller than the $569bn the government borrowed from October to December last year - which was the all-time high for any quarter.

US consumer spending fell for a sixth consecutive month in December, according to the Commerce Department.

Although the decline was expected, the 1% drop was worse than the 0.9% contraction predicted by analysts.

Meanwhile, construction spending fell for a third month in a row in December, dropping 1.4%.

Print Sponsor


RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites


FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC iD

Sign in

BBC navigation

Copyright © 2016 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific