WASHINGTON — The White House on Thursday raised the prospect that the price tag for bailing out the financial system could more than double to nearly $1.5 trillion.
President Obama's fiscal 2010 budget outline, released Thursday, warns that, should economic conditions worsen, an additional $750 billion could be required on top of the $700-billion rescue fund authorized by Congress last fall.
"We hope that it will not be necessary," Peter R. Orszag, director of the Office of Management and Budget, said of increasing the bailout fund. "We have no plans to go to Congress at this point to ask for additional money."
Highlighting the industry's problems, the government reported Thursday that banks and savings institutions insured by the Federal Deposit Insurance Corp. collectively incurred a net loss of $26.2 billion in the last three months of 2008, the first such quarterly loss since 1990.
Obama's budget outline for the fiscal year beginning Oct. 1 also calls for greater spending on oversight of the financial markets, with budget increases of 13% for the Securities and Exchange Commission and 44% for the Commodity Futures Trading Commission. In addition, the outline says more money would be provided to the Justice Department to investigate mortgage fraud and other financial activities, although an exact amount isn't specified.
Some lawmakers have called for boosting regulatory enforcement efforts, particularly at the SEC, which has been sharply criticized for failing to identify Bernard L. Madoff's alleged Ponzi scheme.
SEC chief Mary L. Schapiro said the additional money for the agency in the fiscal 2010 budget would allow it to increase its staff and use new technology "to pursue risk-based approaches that would better detect fraud and ensure stronger oversight of the nation's securities markets."
But the main focus of the government's response to the financial crisis continues to be stabilizing the banking industry. The Treasury Department on Wednesday began so-called stress tests of the nation's largest banks to assess whether they could survive two more years of harsh economic conditions.
Such a worse-than-expected scenario was behind the decision to include the "contingency reserve" in the budget.
Analysts expressed little surprise that the cost of the bailout might top $1 trillion, in part because some of the money has been used for other purposes, such as assisting automakers and reducing home foreclosures.
