By Emily Kaiser
WASHINGTON, Feb 24 (Reuters) - President Barack Obama acknowledged on Tuesday what many economists, investors and lawmakers have long suspected -- repairing the U.S. economy will cost more than the trillions of dollars already committed.
In one blunt sentence, Obama finally spent some of his own political capital laying the groundwork for another cash request that will likely provoke an angry response from voters fed up with bailout after bailout.
"This plan will require significant resources from the federal government -- and yes, probably more than we've already set aside," Obama said in his first major policy speech since taking office in January.
He offered no sense of how much more might be needed, but here are some ways that additional funding could be used:
RECAPITALIZING BANKS:
Regulators will begin a thorough review on Wednesday of large banks' balance sheets, assessing the sort of assets on the books and how much capital firms should hold in order to maintain lending even if the economy worsens.
Those banks found lacking can first look for private sources of funding. If none are readily available they will need to come to the government for support.
While Treasury Secretary Timothy Geithner has not asked for more money to shore up the banks, the assumption is he will have to eventually. How much is needed will depend on the result of the reviews, which Geithner has called stress tests.
Federal Reserve Chairman Ben Bernanke said earlier on Tuesday that the result of the tests will not be a pass or fail, but rather a realistic assessment of how much -- and what type -- of capital those banks ought to have on hand.
The International Monetary Fund has estimated that U.S. and European banks will need at least an additional $500 billion in capital to handle write-downs that are likely to come in 2009 and 2010.
Of the $700 billion bailout fund, a little over $306 billion has been spent. Much of the remainder has already been pledged to various rescue programs.
IN CASE OF FAILURE:
While the White House and Bernanke have gone to great lengths to stress that they do not want to nationalize banks, there is still a big question mark over what will be done with firms that are found to be too weak to survive.
The Federal Deposit Insurance Corp is responsible for making depositors whole when banks fail, and has already been called upon to wind down more than three dozen institutions since the credit crisis began in August 2007.
But it has never tackled shutting down a huge, global banking institution with wide-ranging businesses and a host of complicated, interconnected securities.
The FDIC's fund to back deposits at member banks fell 23.5 percent in the third quarter of 2008 to $34.6 billion. That amount included about $12 billion provisioned for failures it expected in the fourth quarter of 2008.
The FDIC said in December that it expected its fund to drop to about $29 billion at the end of the fourth quarter. The exact figure will be released on Thursday.
The agency has asked Congress to more than triple its line of credit with Treasury to $100 billion, but that amount could be quickly wiped out if some of the largest U.S. banks folded.
HOUSING MARKET:
Obama has already committed $275 billion to strengthening the housing market. Of that, $75 billion is aimed at preventing foreclosures.
That amounts to only about 8 percent of the $1 trillion in residential mortgage losses that Goldman Sachs economists expect, excluding loans backed by mortgage finance companies Fannie Mae and Freddie Mac.
Data released on Tuesday showed that home prices dropped at a record pace in December. The S&P/Case-Shiller index, which tracks home prices in 20 major cities, dropped 18.5 percent from a year earlier. Many economists think another 10 percent decline is likely.
The risk is that just as the housing market rose too far during the boom, it may decline too precipitously during the bust. If that happens, $75 billion probably will not be enough to stop foreclosures from soaring.
WHO ELSE WANTS MONEY?
The auto industry already took a slice out of the $700 billion bailout fund and is seeking even more money to stave off bankruptcy. General Motors Corp and Chrysler LLC have requested nearly $22 billion in loans, on top of the $17.4 billion that they already received.
American International Group Inc may come back for its third round of government help, a source familiar with the matter said earlier this week. The company is bracing for a roughly $60 billion fourth-quarter loss, which would be the biggest in corporate history. (Additional reporting by Karey Wutkowski, editing by Chris Wilson)