Washington (AP): President Barack Obama said on Monday he would set up an independent Board to review spending of his economic $800 billion-plus stimulus plan to pull the nation out of it's deep economic recession.

The measure was passed by the House of Representatives last week and is under debate in the Senate, although failing to attract significant Republican support in either legislative chamber as he had hoped.

The president also predicted that some of America's troubled banks still could fail, despite a separate $700 billion financial bailout programme, half of which has already been spent by the former Bush administration.

The President also said that he was taking full responsibility for rescuing the U.S. economy, which is facing its worst downturn in 80 years.

"If I don't have this done in three years then there's going to be a one-term proposition," Obama said, already looking forward to the 2012 Presidential election.

Administration officials, the Federal Reserve and top banking officials are working on proposals for how the government will use the last $350 billion from the $700 billion rescue programme, with some lawmakers clamouring for greater oversight.

Obama managed to win no Republican votes when the $819 billion version of the stimulus bill passed the House of Representatives last week. Republican senators also have balked, declaring the measure too focused on government spending to the exclusion of tax cuts. The Senate version of the plan totals $900 billion and a vote was expected later this week.

The President downplayed the political tussle, saying what he called "very modest differences" should not delay swift passage of the stimulus package, appealing to Congress even as the nation dealt with another dose of dire financial news.

Obama issued his new appeal at a meeting with Vermont Gov. Jim Douglas, the Republican vice chairman of the National Governors Association. Douglas is among several Republican governors who have broken with their party colleagues in Congress in seeking approval of the Obama measure.

Obama said governors of both parties had been pressing him for a stimulus plan since his election in November.

Obama and Vice-President Joe Biden were scheduled to meet at the White House on Monday afternoon with Democratic congressional leaders about the stimulus package.

Obama spoke as the Commerce Department reported that personal spending fell for the sixth straight month in December by 1 per cent.

Analysts had predicted a decline of 0.9 per cent. Incomes also dipped, and the personal savings rate shot higher, a sign that consumers remain extremely nervous about the economy.

The department also said construction spending dropped by 1.4 per cent in December, slightly worse than the 1.2 per cent decline economists expected.

The financial bailout program appeared likely to be expanded beyond the $700 billion now allocated by Congress.

"We can expect that we're going to have to do more to shore up the financial system," Obama said in an interview with NBC television.

An announcement is expected next week on how the Obama administration plans to use the last $350 billion of that effort, which has come under heavy congressional and public criticism.

The massive infusion of taxpayer money into the financial sector has largely failed to thaw the nation's credit markets, while some financial institutions used the money to pay dividends, buy other banks and pay out big year-end bonuses to employees.

In the current climate, Obama said some of the nation's banks would have to write down bad debts, while other banks may fail.

"It is likely that the banks have not fully acknowledged all the losses that they're going to experience. They're going to have to write down those losses. And some banks won't make it," he said.

While keeping up a drumbeat of dire predictions in the short term, Obama assured Americans that their bank accounts were not in danger.

"All deposits are gonna be safe for ordinary people. But we're gonna have to wring out some of these bad assets," he said.

Obama also said he had not yet decided on adding U.S. troops to the war in Afghanistan. He pledged during the campaign to refocus American military efforts on that country as American forces were withdrawn from Iraq in the first 16 months of his administration.

"I haven't definitively authorised the 30,000 troops (for Afghanistan), although planning has been done," the president said, acknowledging a final outcome in the country was not going to produce a western-style democracy.

The militant Taliban, which the U.S. military drove from power in Afghanistan after the September 11, 2001, attacks has regained a significant foothold in the country. Also, the U.S. still has not caught al-Qaida terror mastermind Osama bin Laden, who is believed hiding in a largely lawless region of neighboring Pakistan.

On other issues, Obama said his decision to close the Guantanamo prison "will make us safer" and ensure that the government is upholding legal guarantees under the U.S. justice system. He said again that his decision to close the military prison at the U.S. naval base in Cuba was driven by his attempts to balance "what's going to keep the American people safe" and constitutionally guaranteed rights for those imprisoned.