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Cheaper bank bail-outs lead Obama to weigh job spending

business Updated: Dec 08, 2009 07:45 IST
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US President Barack Obama is mulling whether to inject more public funds into the struggling jobs market in the US, taking advantage of the less-than-expected cost of financial bail-outs over the past year.

Obama was expected to unveil a package of measures to tackle unemployment during a major economic speech on Tuesday. The country's jobless rate unexpectedly fell in November to 10 percent, but remains at a 26-year high.

Federal Reserve Chairman Ben Bernanke suggested Monday that a tentative economic recovery in the United States was not a foregone conclusion and warned that unemployment would remain high for some time to come.

"Though we have begun to see some improvement in economic activity, we have some way to go before we can be assured that the recovery will be self-sustaining," Bernanke said in a speech before the Economic Club of Washington.

Obama has been given some extra wiggle room because of the stabilizing financial system: The Treasury Department is cutting its long-term cost projections for the government's bail-out programme by $200 billion, The Wall Street Journal reported Monday.

The $700-billion financial rescue package, which was approved by Congress in October 2008 to help keep Wall Street afloat, is now expected to cost just $141 billion over the next 10 years as many banks have already paid back their emergency loans.

More than $70 billion in loans have been returned and Bank of America announced last week that it, too, planned to pay back the $45 billion it was given at the height of the financial crisis.

The lower cost comes as welcome news for an administration that has been heavily criticized for running a sky-high budget deficit in order to wrest the US economy out of recession.

The White House and Congress have signalled that they will use the new-found funds to stimulate job growth, including a so-called "cash-for-caulkers" programme that would offer Americans tax incentives to weatherize their homes.