WASHINGTON (AP) - President Barack Obama is anticipating a new $750 billion bank bailout this year, more than doubling the direct infusion of taxpayer money into the reeling financial sector.
The White House's 2010 budget released Thursday includes a $250 billion contingency fund for 2009 that - if needed - could leverage three times as much in asset purchases from financial institutions in need of capital.
In essence, however, taxpayers would foot the entire $750 billion up front. Administration budget writers say the value of the assets that the government has already acquired suggest a return to the government of 66 cents for every $1 spent, hence the $250 billion net expenditure.
"We hope that it will not be necessary," White House budget director Peter Orszag said Thursday. "We have no plans to go to Congress at this point to ask for additional money.... The placeholder is in case the situation deteriorates further and more intervention is necessary."
Still, the inclusion of the money is the clearest sign yet that Obama's economic team is not satisfied that the $700 billion Troubled Asset Relief Program that Congress approved last fall has done enough to unlock the capital markets and make credit more available.
In adding the $250 billion contingency to the 2009 projected spending, the members of Obama's budget team increased their own deficit forecast for the year from a record $1.5 trillion to a soaring $1.75 trillion.
Obama signaled the possibility of a new bailout request to Congress in his address to lawmakers on Tuesday. Describing financial sector assistance already in the pipeline, Obama told Congress, "this plan will require significant resources from the federal government - and, yes, probably more than we've already set aside."
The Troubled Asset Relief Program, or TARP, has proven to be an unpopular expenditure with the public and with many in Congress who believed financial institutions received the money with little accountability and with few strings attached. Since becoming president a month ago, Obama and his Treasury Department have taken steps to tighten conditions on beneficiaries of the funds.