Obama Indicates Another $750B Needed For Banks

The following excerpts are extracted from a 35-minute conversation President Obama had with The New York Times aboard Air Force One on Friday as he was flying home from Ohio. The president touched on a few subjects including the economic crisis.

The president said he could not assure Americans the economy would begin growing again this year. But he pledged that he would “get all the pillars in place for recovery this year”…

“I don’t think that people should be fearful about our future,” he said. “I don’t think that people should suddenly mistrust all of our financial institutions.”

Obama said his actions have been “entirely consistent with free-market principles” and pointed out that large-scale government intervention in the markets and expansion of social welfare programs began under Bush.

Mr. Obama indicated that the end was not in sight when it came to the economic crisis and suggested that he expected it could take another $750 billion to address the problem of weak and failing financial institutions beyond the $700 billion already approved.

The budget plan he released last month included a placeholder estimate of $250 billion for additional bank bailouts - an amount that represents the projected long-term cost to taxpayers of a $750 billion infusion into the financial sector - and in the interview Mr. Obama indicated that those figures were what he was likely to seek from Congress.

“We have no reason to revise that estimate,” he said.

Mr. Obama urged Americans to “be prudent” in their personal financial decisions, but not to hunker down so much that it would further slow the recovery.

Still, he avoided guessing when the situation might begin to turn around.

Obama’s uncertainty notes the Times, about when the economy will begin to recover contrasted with the projections embedded in the budget he recently released - which suggested the economy would start rebounding in the second half of current fiscal year. In all fairness to the president, can’t blame him for being prudent. Considering the unpredictability in the dynamics in which our financial and economic system currently finds itself in, and more importantly - the magnitude of the economic crisis/mess he inherited; a ‘better safe than sorry’ type strategy, seems logical.

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