SCENARIOS: Obama warns of costlier U.S. financial fix

By Emily Kaiser

WASHINGTON (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 administration is also planning to establish a public-private partnership to take bad assets off bank books. It has yet to say how big the government's share would be.

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.