WASHINGTON (Reuters) - Major U.S. banks are still hemorrhaging red ink, despite massive taxpayer aid, and President Barack Obama is under pressure to take a high-stakes political gamble -- asking for another bailout.

Wind blows the flags outside the Citigroup building in New York November 17, 2008. REUTERS/Chip East

Whether he would get one from a skeptical Congress is unclear, given the wide dissatisfaction with the first bailout, known as the Troubled Asset Relief Program, or TARP, a $700 billion fund to stabilize the banks and Wall Street.

The political danger of backing another aid package was vivid on Thursday when the House of Representatives voted 270-155 against releasing a second allotment of $350 billion to the TARP. The money will be released, nonetheless, because the Senate previously voted not to block the funds.

With the most recent TARP vote as a backdrop, analysts said that, if Obama sought more bailout money and Congress approved it, financial markets and bankers would certainly be pleased.

But lawmakers who voted in favor of such a program could pay a high price with voters in elections two years away.

And if the new president requested more money and Congress rejected him, the markets might plunge like they did last year when the Bush administration’s initial TARP funding request was defeated, although it was later approved.

Neither outcome looks too rosy for Obama and congressional Democrats, leading some analysts to conclude that “TARP II” may not be on the cards.

“There would be tremendous political risk as Obama could lose the vote. That would spook markets even more and could make conditions worse. That is why we see this as a very last resort,” said Jaret Seiberg, financial services policy analyst at investment firm Stanford Group Co.

“At this point, we do not expect Congress to enact a TARP II bill. Instead, we believe Treasury, the Federal Reserve and the (Federal Deposit Insurance Corp) will find creative ways to recapitalize the banks ... Still, one cannot rule this out if conditions get worse than expected.”

OBAMA MUST ASK

Massachusetts Democratic Rep. Barney Frank said on Tuesday he would be open to expanding the TARP only if the original $700 billion was expended fully on “constructive” measures, including foreclosure mitigation.

He would back more money only if Obama asked for it and if events warranted, he said, adding that they currently do not.

But Pennsylvania Rep. Paul Kanjorski, a top Democrat on the House Financial Services Committee that is chaired by Frank, told C-SPAN television on Tuesday: “I guarantee ... we’re going to have another bailout for Wall Street because we are not doing these things properly.”

One alternative to more capital injections under TARP is for the government to create a “bad bank” or “aggregator bank” to clean toxic assets from struggling financial companies.

Senate Banking Committee Chairman Chris Dodd said on Tuesday he was aware the Obama administration was discussing the idea.

“It makes some sense to me,” Dodd added.

As Obama visited Capitol Hill on Tuesday seeking Republican support for an economic stimulus plan, he acknowledged the bad asset problem.

“We’re going to have to deal with the troubled assets that many banks are still carrying and that ... have locked up the credit system,” he said.

It is unclear how an aggregator bank would be paid for.

LOSSES ACCUMULATE

Along with an assortment of Federal Reserve emergency financial-stabilization initiatives, the TARP has been handed over midstream to Obama by former President George W. Bush.

The program has already pumped billions of dollars in taxpayer funds into more than 250 banks, while aiding automakers General Motors Corp GM.N and Chrysler LLC, as well as insurance giant American International Group Inc AIG.N.

Despite this help and the Fed's unprecedented actions, banks this month have been racking up staggering quarterly losses: $8.3 billion at Citigroup Inc C.N, $1.8 billion at Bank of America Corp BAC.N and $2.2 billion at Morgan Stanley MS.N.

Goldman Sachs economist Jan Hatzius recently said global credit losses may approach $2.1 trillion.

Of that total, banks worldwide have already absorbed about $975 billion in losses, he estimated in a research report, suggesting the worst is far from over.

FBR Capital Markets analysts said eight of the largest U.S. financial institutions need up to $1.2 trillion in new common equity and that “the government is the only entity that can provide bridge capital to get past the current credit crises.”

With losses piling up at major banks and the recession deepening, U.S. House Speaker Nancy Pelosi said on Sunday the government may need to pump “some increased investment” from taxpayers, beyond the TARP, into the banks.

Lawrence Summers, the head of Obama’s National Economic Council, would not on Sunday rule out the possibility that more money might be needed to stabilize the financial system.

But such a request may wait awhile since it was less than two weeks ago that Congress approved the second, $350 billion funding allotment from the existing program.

“It would seem prudent to figure out how you’re going to deploy that before you start asking for more money. I don’t think the sentiment in Congress right now is to just keep approving these bills,” said Daniel Arnold, associate director, at financial group Sandler O’Neill.