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Obama Will Seek More Aid for Banks If Necessary, Orszag Says
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By Ian Katz

March 1 (Bloomberg) -- President Barack Obama’s administration will seek congressional approval for as much as $750 billion in new aid to bolster U.S. financial institutions if it is needed, White House budget director Peter Orszag said.

“If additional efforts become necessary, we’ll work with Congress on the scale and scope of them,” Orszag said today on ABC’s “This Week” program. “The budget is intending to be responsible. We put a placeholder in there just as an insurance policy.”

Obama’s first budget, a plan to spend $3.55 trillion during fiscal year 2010, seeks standby authority for $750 billion for financial firms while planning for a health-care system overhaul and almost $1 trillion in higher taxes for 2.6 million of the richest Americans.

U.S. firms have reported more than $700 billion in losses and writedowns since the start of 2007.

The government last week ratcheted up its effort to save Citigroup Inc., agreeing to a third rescue attempt that will cut existing shareholders’ stake. The Treasury Department said it would convert as much as $25 billion of preferred shares into common stock provided private holders agree to the same terms. The conversion would give the U.S. a 36 percent stake in the New York-based company.

Obama said yesterday he expects a fight to get the budget through Congress because it will challenge Washington interest groups and lobbyists. The president, in his weekly radio address, said the spending plan reflects the promises he made during the campaign to change the government’s priorities and take the nation in a new direction.

‘Mind-Boggling’ Numbers

Senate Minority Whip Jon Kyl of Arizona criticized the budget for expanding the government’s role in the economy. “I think it’s terrifying in the policy implications as well as mind- boggling in the numbers,” Kyl said on “Fox News Sunday.”

Obama’s budget is an attempt to “stimulate the economy through government expenditure,” House Minority Whip Eric Cantor said on the “This Week” program. “At best what that can do is redistribute wealth. It can’t create jobs. It can’t create wealth. We’ve got to get back to focusing on job creation and creating prosperity.”

The Obama administration forecasts the gross domestic product, the value of all goods and services, will contract 1.2 percent for the entire year, reflecting the deepening recession, and rebound to an average growth rate of 3.2 percent in 2010.

The 2010 forecast is more optimistic than the 1.5 percent growth rate estimated by the nonpartisan Congressional Budget Office in January or the February Blue Chip consensus for an increase of 2.1 percent.

Obama’s proposed budget “is putting us on a path to restore fiscal responsibility, but he’s starting in a big hole,” Representative Peter DeFazio, a Democrat from Oregon, said on CNN’s “State of the Union” program today. “So I’m going to work with the president to tighten this budget wherever we can.”

To contact the reporter on this story: Ian Katz in Washington at [e-mail].