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More banks likely to fail, Obama warns

Mismanagement by the nation’s lending institutions was so extreme that even now, the losses sustained by banks still cannot be calculated and more are likely to fail, President Barack Obama said in an interview with TODAY co-host Matt Lauer.

Mismanagement by the nation’s lending institutions was so extreme that the losses sustained by banks still cannot be calculated and more are likely to fail, President Barack Obama warned.

In an interview airing Monday on NBC’s TODAY show, Obama said the nation’s banks were in “very vulnerable positions” because of the reckless risk-taking that led to the meltdown of the financial services sector late last year. The situation he inherited 13 days ago is so bad that “it is likely that the banks have not fully acknowledged all the losses that they’re going to experience,” Obama said in the interview, which was conducted Sunday at the White House.

Stressing that ordinary Americans’ deposits, which are insured by the federal government, would be safeguarded, the president said banks were “going to have to wring out some of these bad assets.”

Inevitably, he told TODAY anchor Matt Lauer, “some banks won’t make it.”

The president’s message appeared to be a shot across the bow of Senate Republicans, who have objected to the $825 billion bailout of the financial system that was approved last week by the House. Leading Republican senators said they would oppose the bill unless there were major changes, echoing the concerns of their counterparts in the House, none of whom voted for the legislation.

Obama silent on federal ‘bad bank’ proposition
With the scope of the crisis coming into better focus, Obama said he would announce a proposal in the coming days that “strengthens credit markets but, more importantly, puts people back to work.”

One of the proposals discussed in Washington is the creation of a so-called “bad bank” with the authority to acquire troubled assets from lending institutions and other credit-related companies. Obama refused to confirm or deny that such a plan was on the table, saying, “If I say that we’re doing one thing, then the markets might interpret it differently from what it ends up being.”

Obama’s comments came in the second of two interviews he gave NBC News on Sunday. In the first, the president said that once the scope of his proposals was known and Republican suggestions had been incorporated into the Senate version of the bill, he was “confident that by the time we actually have the final package on the floor, that we are going to see substantial support” from Republicans.

Still, he said later, it could be as long as a year before “people are going to see that we’re starting to make some progress.”

“There’s still going to be some pain out there,” Obama said, acknowledging that the success of his presidency could hang in the balance.

“If I don’t have this done in three years, then there’s going to be a one-term proposition,” he said. “And I welcome that responsibility, because I think now’s the time for us to start shifting and thinking about long-term economic growth.”

Risk of closing Guantanamo
The wide-ranging interviews, Obama’s first as president with a U.S. news organization, touched on a range of issues, from the economy to the administration’s decision to close the U.S. prison at Guantanamo Bay Naval Base in Cuba, where alleged adherents of the al-Qaida terrorist organization remain incarcerated as enemy combatants.

Obama said he knew he was taking a risk by closing the prison, but he insisted that “it’s the right thing to do.”

“It ultimately will make us safer,” Obama said. “You’ve already seen, in the reaction around the world, a different sense of America by us taking this action.”

Obama said he would turn to “some very smart Republicans” for advice on how to safeguard both Americans’ security and the detainees’ constitutional rights. He specifically mentioned Sen. Lindsey Graham, R-S.C., a senior member of the Armed Services Committee and a former judge advocate in the Air National Guard, and he noted that his Republican opponent in the presidential election, Sen. John McCain of Arizona, agreed with the need to close the facility.

“What I’m convinced of is we can balance those interests in a way that makes all of us proud but also assures that we’re not attacked,” Obama said. 

Of the 245 detainees at Guantanamo Bay, Obama added: “Can we guarantee that they’re not going to try to participate in another attack? No. But what I can guarantee is that if we don’t uphold our Constitution and our values, that over time that will make us less safe.

“And that will be a recruitment tool for organizations like al-Qaida,” he said.