Two powerful Republicans yesterday called on Barack Obama to let some big banks fail instead of propping them up with public money.

Richard Shelby, the top Republican on the Senate banking committee, warned that the US would end up following the same path as Japan, which suffered a lost decade of economic growth by tackling its banking crisis too slowly, unless some big institutions were allowed to fail.

The Obama administration is administering so-called stress tests on 19 leading financial institutions to see whether they can weather the economic climate. Citigroup shares dipped to below $1 last week as investors pummelled the financial sector.

Financial Times