President Obama is considering another massive injection of cash into America’s stricken banking system, a move that will be deeply unpopular with the public but is being forced upon him by the speed at which the US economy is unravelling.

With the collapse on Saturday of the third US bank this month — the First Centennial Bank of California — Mr Obama is under pressure to spend hundreds of billions more to rescue the financial system. It would come on top of last year’s $700 billion (£515 billion) Wall Street rescue package that was opposed by most Americans. They viewed the plan as a bailout of the bankers that they blame for the financial crisis.

Any additional move to ease the crisis afflicting America’s banks will be separate from Mr Obama’s $825 billion economic stimulus package that senior aides spent the weekend trying to sell to a growing number of Republican sceptics and the US public.

The huge stimulus package, aimed at creating jobs and re-starting the economy, is expected to pass Congress because Mr Obama enjoys majorities in the House and Senate. His hopes of winning bipartisan approval for the plan have foundered in recent days because of growing Republican misgivings about the size of the Bill and whether it will work.

“As it stands now, I would not support it,” said John McCain, who had vowed to help Mr Obama as much as he could and whose vote the new President would dearly like to have.

Mr Obama knows that he has to act quickly to rescue the ailing economy but the stakes and the costs are rising by the day. Financial companies are still facing potential losses of trillions of dollars on bad mortgages and other loans, despite last year’s $700 billion rescue package aimed at easing the frozen credit markets. They are also facing losses on assets they considered safe just a few weeks ago. More banks are sliding towards collapse.

Mr Obama and his economic team are alarmed at the speed and unpredictability of the US economy’s erosion, throughout the country and within the banking sector. His Administration will gain control of the remaining $350 billion of the $700 billion rescue package tomorrow, but many economists now believe that it will be woefully insufficient.

The scale of potential spending and rising debt is extraordinary. The US federal budget deficit is projected shortly to pass $1 trillion. Mr Obama will face stiff opposition from Republicans on Capitol Hill for any more money aimed at the banking sector — one issue where the opposition party will be assured of public support.

“The big task is not to reference this as a bailout,” said James Carville, Bill Clinton’s former strategist. “[Obama] is going to have to be the teacher and communicator-in-chief here.” Goldman Sachs predicted last week that US banks will record an extra $1.1 trillion in losses before the economy turns around, with others putting the figure at $3.5 trillion.

It is expected that unemployment will reach 10 per cent this year — 500,000 jobs are being lost every month — and estimates show that eight million families will lose their homes over the next four years. “It’s worse than everybody thought it was,” Vice-President Biden told CBS’s Face the Nation. “There is no good news and no good news on the horizon.”

Mark Zandi of Moodys.com, an economist who spoke to Senate Democrats on Thursday, said that conditions in the US banking system were “eroding far more rapidly than anyone anticipated”.

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