WRAPUP 5-Obama vows to slash wasteful U.S. spending

* Obama announces budget team

* Gates expected to stay as Defense Secretary

* Obama to hold third news conference on Wednesday

* Federal Reserve announces $800 billion in new relief

By Ross Colvin and Jeff Mason

CHICAGO, Nov 25 (Reuters) - President-elect Barack Obama vowed on Tuesday to cut billions of dollars from wasteful government programs as he sought to reassure Americans anxious about a growing mountain of debt and a faltering economy.

Obama held a second news conference in Chicago in two days, and planned a third for 10:45 a.m. EST (1545 GMT) Wednesday, seeking to calm see-sawing financial markets looking for signs that his incoming administration has a viable plan to tackle the worst economic crisis in decades.

He was expected to move away from the economy by early next week and announce some national security choices. They were reported to include making Sen. Hillary Clinton secretary of state and asking current Defense Secretary Robert Gates to continue in his post.

In his news conference on Tuesday Obama vowed to run a cost-effective and efficient government. "If we're going to make the investments we need, we must also be willing to shed the spending we don't."

"We cannot sustain a system that bleeds billions of taxpayer dollars on programs that have outlived their usefulness or exist solely because of the power of a politician, lobbyist or interest group," he said.

An obvious example, Obama said, were reports of crop subsidies to farmers who make more than $2.5 million per year. He did not say what other programs he was eyeing.

Obama named Peter Orszag and Rob Nabors as the top two officials at the Office of Management and Budget, charging them with examining federal spending to cut wasteful programs.

Orszag immediately resigned as head of the Congressional Budget Office. Nabors serves as staff director of the House Appropriations Committee. Both held White House positions under President Bill Clinton.

The two join a growing economic team which is already designing a stimulus package to jolt the U.S. economy back into growth -- a proposal Obama has said will be costly.

"Given the extraordinary circumstances we find ourselves in ... it is important for the American people to understand that we are putting together a first-class team and that we don't intend to stumble into the next administration," he said.

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