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WASHINGTON - A top economic adviser to President Barack Obama said yesterday that the financial wounds at the centre of the economic downturn would require "lots more billions of dollars" to mend.
"It's going to cost more money to deal with this financial crisis," Paul Volcker, chairman of the President's Economic Recovery Advisory Board, told members of the Senate banking committee. "It's going to be lots more billions of dollars."
Volcker said he could not affix a figure to the cost of helping financial institutions free themselves from suffocating bad assets that have locked up credit.
Earlier, Treasury Secretary Timothy Geithner said the Government would have to do "substantially more" to address the crisis.
The statements came as the Senate voted to give a tax break of up to US$15,000 ($29,525) to homebuyers in hopes of revitalising the housing industry, a victory for Republicans eager to leave their mark on the mammoth economic stimulus bill at the heart of Obama's recovery plan.
The tax break was approved without dissent and came on a day in which Obama pushed back pointedly against Republican critics of the legislation even as he reached across party lines to consider a reduction in the spending it contains.
Obama warned that failure to act quickly "will turn crisis into a catastrophe and guarantee a longer recession."
Democratic leaders have pledged to have legislation ready for Obama's signature by the end of next week. They concede privately they will have to accept some spending reductions, although Republicans failed to force deep cuts in the bill.
On another contentious issue, the Senate softened a labour-backed provision requiring that only US-made iron or steel is used in construction projects paid for in the bill. A move by Senator John McCain to delete the so-called Buy American requirement failed, 31-65.
But with Obama voicing concern about the provision, the requirement was changed to specify that US international trade agreements not be violated.
Earlier yesterday, Obama said he would examine ways to change Wall Street's bonus culture and curb excessive pay as he launched a new US$500,000 cap on salaries for the bosses of banks that have to be propped up by the US taxpayer.
Obama said he would be "demanding restraint" in return for federal aid.
The measures announced yesterday may curb pay for only a small number of executives, or perhaps none if no more banks come to the brink of collapse.
Only banks receiving "exceptional assistance" will have to abide by the rule, since those taking money generally available from the US$700 billion Wall Street bailout fund can ask their shareholders for a waiver. The new measure will not apply retrospectively to bosses whose companies have already been given cash infusions.
- INDEPENDENT, AP
