The Irish Independent reports that fraud squad detectives have seized key documents linked to the €451m 'golden circle' loans from the headquarters of Anglo Irish Bank, the Irish Independent has learned.

The loans were the primary focus of initial searches on Tuesday of Anglo's headquarters by officers acting under the direction of corporate enforcer Paul Appleby.

The revelation came as the Financial Regulator, which has been conducting a separate investigation into matters at the bank, last night confirmed it uncovered matters "of such a serious nature" that they had now been referred to the gardai.

The Irish Independent understands the material passed to detectives also relates to the 'golden circle' transactions , and to the movement of €7.45bn in deposits between Anglo Irish from Irish Life & Permanent to bolster Anglo's books.

The disclosures gave an indication of the gathering momentum behind separate investigations by the Director of Corporate Enforcement and the Financial Regulator.

Documents seized at the bank's headquarters, on St Stephen's Green in Dublin, in the two days since it was raided by fraud squad detectives were being examined last night at Mr Appleby's office, where tight security has been put in place to safeguard the material.

The Government recently sanctioned a €500,000 contract to beef up security at the office on Parnell Square in Dublin in recognition of Mr Appleby's growing role in investigating alleged white-collar crime.

Investigators from his office, backed up by 16 gardai from the Garda Bureau of Fraud Investigation, are expected to resume searches at Anglo Irish's headquarters this morning.

Informed sources last night revealed the main focus of the initial searches was documentation about the so-called 'golden circle' loans in the context of possible breaches of Section 60 of the Companies Act.

That section of the act bars firms from providing loans to buy their own shares, except where the money lent is"part of the ordinary business of the company".

Anglo Irish loaned €451m to a group of 10 customers so they could buy a 10pc stake in the ailing bank to support its share price. The director is investigating whether that amounted to market manipulation.

Under tough new EU rules, insider dealing and market manipulation are punishable by fines of up to €10m and a maximum 10-year prison term if a person is convicted.

Legal and accounting sources last night said that for the loans to be put in the clear, the Director of Corporate Enforcement and Financial Regulator would need to conclude that they were made under normal commercial terms.

Anglo has always insisted that before making a loan, it firstly looked at a borrower's ability to repay.

It also placed a huge emphasis in the normal course of lending on getting hold of other assets belonging to a borrower as security, as well as personal guarantees that the loans would be paid back.

However, this does not appear to have been the case with the 'golden circle' loans.

Anglo Irish confirmed last week that 75pc of what was borrowed by the 'golden circle' was only backed by the shares themselves, which are now virtually worthless.

Just 25pc of the total loan was backed by other collateral from the investors -- meaning that they can really only be chased for €112.75m.

They have already paid back €83m of the total loan, believed to have come from the sale of some Anglo shares before it was nationalised.

Mr Appleby is also seeking to establish whether the loans were made in line with normal lending practice. His office will be looking to see if the bank pre-packaged the loans for the 'golden circle' or if the investors actually asked the bank to provide funding for the deal.

Sources emphasised that although these loans were the initial focus of the inquiry, Mr Appleby's team will also be getting to grips with other areas, including loans to directors.

Attack

Meanwhile, the Opposition went on the attack last night over the Government's failure to sanction 20 additional staff for the Director of Corporate Enforcement when he sought them in 2005.

Tanaiste and Enterprise Minister Mary Coughlan admitted that it took two years for the request to be reviewed.

At that stage only eight additional staff and one additional garda detective were assigned to the director.

Fine Gael Enterprise spokesman Leo Varadkar claimed the revelation showed Fianna Fail had a soft stance on corporate crime.

"Fianna Fail ministers have repeatedly refused requests from the Office of the Director of Corporate Enforcement for extra staff and more resources in its fight against white-collar crime,"said Mr Varadkar.

The Tanaiste said she would be "sympathetic to any reasonable request for additional resources" which Mr Appleby may need to complete the Anglo Irish investigation.

The Irish Independent also reports that the Government has raised another €4bn on financial markets to help cover record borrowings this year.

The successful funding from around 80 national and international banks and institutions by the National Treasury Management Agency (NTMA) brings the total raised in the first two months of the year to €10bn.

When the replacement of existing debt is included, total borrowing this year will be in excess of €20bn. NTMA managing director Michael Somers said they were happy to have raised so much of the total so early in the year.

He dismissed widespread suggestions that Ireland might not be able to raise all the money it needs from the markets.

"I don't think that's a possibility. We are a member of the euro area. The German finance minister has made very positive noises about not letting a euro country get into real difficulties. A lot of these stories and rumours are way over the top,"Dr Somers said.

He said the NTMA was "very pleased" with the success of the fund-raising, through the sale of government bonds paying a fixed rate of interest. Institutions asked for €5.2bn in total, but it is normal to take less than the total offered so as to leave some demand for the bonds in the market.

Sources said, however, that it had required hard work on the part of the NTMA to raise the funds.

As well as fears over Ireland's large budget deficits, and the scale of its banking problems, the bonds of small countries are suffering in nervous markets because they may be harder to trade.

The three-year bonds were sold at a price which means the taxpayer is paying interest of 4.01pc on them. German two-year bonds are yielding as little as 1.25pc in market trades, but the German government has not been able to raise actual new debt as cheaply as that.

Crisis

Until the credit crisis began, all euro area governments could borrow at very similar rates. But markets have begun to ask for much higher rates from countries with bigger borrowings or poorer economic prospects.

Continuing rumours about the state of the banks are not helping. Most of the banks covered by the €440bn government guarantee insisted yesterday they had not seen a marked change in their deposit bases in recent weeks.

This follows comments from Finance Minister Brian Lenihan that there has been "some outflow of funds" but that it"has not reached a critical level".

AIB said: "We're not concerned about our deposit base, but can't comment in detail." Bank of Ireland repeated an earlier statement that, "despite intense international competition, customer deposits are expected to be modestly higher than the prior year".

IL&P said:"We are not seeing any significant movements in deposits."

It is expected to reveal with its full-year figures next week that its reliance on European Central Bank funding rose from the €4bn-€5bn level reported last June.

EBS Building Society said there was "definitely no outflow in recent weeks", while a spokesman for Irish Nationwide Building Society said it has experienced "no significant movement in deposits". Anglo Irish Bank was not available for comment.

The Irish Times reports that Gardaí were last night called in to investigate the Anglo Irish Bank debacle by the Financial Regulator as the inquiry intensified into a criminal investigation.

The regulator said it had referred matters of “a serious nature” relating to possible abuse of stock-market rules at the bank to the Garda Bureau of Fraud Investigation.

Gardaí are already assisting in a separate investigation by the Office of the Director of Corporate Enforcement (ODCE) into possible breaches of company law.

The regulator said in a statement that it had been involved in a number of investigations into the bank and“has concluded that certain matters are of such a serious nature that it was appropriate that they be referred to the Garda”.

Two of the three issues under investigation by the regulator – the deposit transfers of €7 billion into Anglo by Irish Life Permanent (ILP) and secret loans of €451 million to 10 Anglo customers to buy shares in the bank held indirectly by businessman Seán Quinn in order to prop up its share price – have been referred to the Garda.

The maximum penalty for market abuse offences is a €10 million fine and a 10-year prison sentence.

The regulator is still investigating hidden loans to Anglo’s former chair- man, Seán FitzPatrick, and his use of borrowings from Irish Nationwide Building Society to conceal the loans. “We will, of course, fully, assist the gardaí with the investigations. We will not be commenting further on these matters,” the regulator said.

Some 35 investigators from the regulator have been involved in the various Anglo inquiries, including 25 in the bank’s offices. The remaining 10 officials have been split between the offices of ILP and Irish Nationwide.

The referral of the regulator’s inquiry to the Garda came as the ODCE’s investigation into Anglo continued with a second day of searches at its Irish headquarters in Dublin yesterday.

The scandal at the nationalised bank claimed more casualties on the Irish corporate scene with further resignations. Former Anglo non-executive director Anne Heraty, chief executive of recruitment firm CPL, resigned yesterday from the boards of State companies Bord na Móna and Forfás.

Fifteen directors have now resigned from 22 boardroom positions in the fallout from the Anglo affair. In addition, former ILP senior executives Denis Casey and Peter Fitzpatrick are preparing to step down as directors of the Irish arm of German insurer Allianz, in which ILP has an interest.

In a separate development, the Government raised a further €4 billion from investors in the international markets to fund the deepening hole in the public finances. The State’s money manager, the National Treasury Management Agency, sold three-year bonds, bringing to €10 billion the amount raised by the State this year to fund exchequer spending.

The agency last night raised to €25 billion its estimate of the amount the Government will need to raise this year to address the ballooning budget deficit. The cost of raising the €4 billion in funding is the second highest in Europe for three-year bonds; only Greece is paying a higher rate of interest.

The latest Government bonds were sold as Bank of Ireland announced the appointment of an internal candidate to succeed Brian Goggin as chief executive. The head of the bank’s Irish operations, Richie Boucher, will succeed Mr Goggin.

The Irish Times also reports that the sale of Waterford Wedgwood to US firm, KPS Capital, is imminent, with sources suggesting last night that a deal could be done by the weekend.

The luxury crystal and china group’s banks placed it in receivership two months ago, and production at its Kilbarry, Waterford, HQ shut down several weeks later with the loss of 480 jobs.

Sources yesterday said that receiver David Carson of Deloitte, was finalising the terms of the sale of most of the group’s assets to US private equity player, KPS Capital, one of two bidders which emerged after the receiver moved in.

It is understood that KPS will buy most of the group’s assets, which include Waterford Crystal, Wedgwood and Royal Doulton china in Britain and Rosenthal porcelain in Germany.

The US company is committed to maintaining some employment in Waterford, although it is not known how many of the 708 jobs that were there before manufacturing halted will ultimately be saved.

The purchase by KPS also means that jobs will be saved in Staffordshire in England, where the group’s china manufacturing businesses are based.

Sources said yesterday that KPS was likely to get some Government support to further develop the visitors’ centre in Waterford, which is a major tourist attraction in the city and southeast region, and serves as a shop window for the crystal manufacturer’s products.

KPS is a New York-based private equity firm which uses a mixture of investors’ cash and borrowings to fund its purchases. It specialises in buying manufacturing businesses that are insolvent or facing financial difficulties, although the firm does not limit itself to investing in troubled companies.

Last week in the US it bought the New York state-based New Falls Brewery, and the producer of Labbatts beer, which federal competition law obliged owner Inbev Anheuser Busch to sell. Previously KPS has invested in industries such as motor parts manufacture, heavy engineering and paper milling. The company says it has a long track record of dealing with trade unions and organised labour.

Waterford was in the red to the tune of €330 million when its lenders, led by Bank of America, placed it in receivership in early January. The company had failed to meet a number of deadlines for bank loan repayments in the closing months of 2008.

During that time, the group was seeking new investors, and had spoken to KPS and its subsequent rival, Clarion Capital.

Businessman Sir Anthony O’Reilly and his brother-in-law, Peter Goulandris, invested €400 million in the group and own 52 per cent of it. In addition, they have guarranteed some of its borrowings.

Workers at the Waterford plant have carried on a sit-in protest since manufacturing was shut down there at the end of January.

The Irish Examiner reports that credit unions could be forced to curtail their lending after loan arrears soared by 22% to €515 million.

The office of the Registrar of Credit Unions suggested as many as one in 10 of the country’s 410 credit unions may be ordered to curb their lending practices unless they were able to get their houses in order.

Irish credit unions — which have three million members with savings of e11.9 billion — were forced to write off e284m in bad debts last year.

It has also emerged that 115 individual credit unions — almost one in three — are running at a loss.

The office of the registrar was anxious, however, to point out that the vast majority of these credit unions have healthy reserves to call on and are not in any immediate danger of failure.

During a closed-door confidential briefing given to the Credit Union Managers Association Spring Conference in Tullamore yesterday, the deputy head of the department of the Registrar of Credit Unions, James O’Brien, warned that credit unions were undoubtedly facing a difficult 2009.

Mr O’Brien said 115 credit unions reported a loss to his office during the first quarter of their financial year which ended on January 1.

He stressed to the 80-plus credit union managers at the conference that they "better get their house in order" or his office will be forced to do it for them. These credit unions are not expected to pay any dividends in the current year.

The Registrar of Credit Unions, which regulates and supervises all credit unions and which is part of the Central Bank’s Financial Regulator’s Office, said it would not comment on what was a "confidential briefing" when contacted regarding Mr O’Brien’s remarks last night.

During the Tullamore meeting Mr O’Brien emphasised that while there is no imminent danger of any credit union failing, he made it clear his office may have to stop some credit unions lending if the situation continues to worsen.

It is understood that as many as 10% of the credit unions regulated by the registrar are in a "stressed" state and while a handful have already been told to restrict lending the remaining troubled branches may face similar strictures.

As credit union members face difficulties paying off loans, a further e272m in loans are expected to be rescheduled this year.

In January the Registrar of Credit Unions, Brendan Logue, publicly warned credit unions they should prepare themselves for an extremely difficult year in managing their affairs and prepare for further losses on their investments.

At that time Mr Logue told the Credit Union Development Association AGM: "To those boards which have been engaged in the provision of loans for purposes and for amounts which would never have been regarded as normal for the business of a credit union, I have this to say: please stop trying to be banks. Lending for commercial property, project finance or mainline business activity is not the business of credit unions and is not in the interests of members."

The Financial Times reports that European countries are being warned to watch out for the total cost of toxic asset schemes and concentrate measures on ”a limited number of banks of systemic importance”, if resources are scarce.

The European Commission on Wednesday released its new guidelines for such schemes - aimed, in particular, at ensuring that schemes proposed for dealing with pools of impaired assets do not breach the EU’s state aid rules.

The guidance says that government support ”should not be on a scale that raises concern about the sustainability of public finances such as over-indebtedness or financing problems”.

It warns, too, that:”In the context of scarce budgetary resources, it may be appropriate to focus asset-relief measures on a limited number of banks of systemic importance. For some member states, it may be the case that asset relief for banks is severely constrained, due to their existing budgetary constraints and/or the size of their banks’ balance sheet relative to GDP”.

State aid issues arise if the impaired assets are purchased or insured by a government for a value which is higher than the market price or if the price of the guarantee fails to fully compensate the government for its maximum liability under this.

In considering whether to approve such scheme, Brussels will want aid to be limited to ”the strict minimum” necessary for devising a restructuring plan or orderly winding-up and for shareholders to bear losses at least until the regulatory limits of capital adequacy are reached.

The bank/banks should also be asked to contribute to the loss or risk coverage later.

In general, under the guidelines, these schemes should be open for no more than six months after they are launched by a government. During this window, banks would be able to put forward the assets which they want help with.

”This will limit incentives for banks to delay necessary disclosures in the hope of higher levels of relief later on,” Brussels said on Wednesday.

Any application for aid, meanwhile, will have to be backed by full disclosure of impairments by all eligble banks, and banks which benefit from such a scheme will have to accept ”behavioural constraints” - such as restrictions on dividend policy or caps on executive remuneration.

The FT also reports that the EU is falling short of the US response to the economic crisis because governments have failed to work closely enough, the economic and monetary affairs commissioner has warned.

“I really think that the degree of co-ordination could be seriously improved,”Joaquín Almunia said in an interview with the Financial Times. His comments emphasise fears Europe has sown the seeds of a slow recovery and will lag behind the US when the recession ends.

There was too little co-ordination between capitals when economic stimulus packages were drawn up, Mr Almunia said. Some governments – such as the UK’s – had favoured cuts in value added tax while others had boosted government subsidies or cut non-wage labour costs.

A better thought-out approach would have increased synergy between the packages – although, he said: “I don’t say that the present fiscal stimulus is useless.”

The US, which has a federal government, had enjoyed an advantage in this respect, he agreed – although Europe would see a more powerful effect than the US from “automatic stabilisers”, the mechanism by which government spending rises and revenues fall in economically hard times.

The European Commission last month forecast EU gross domestic product would contract by 1.8 per cent this year, a bigger fall than the US. The most recent data had not pointed to any improvement, Mr Almunia said.

Once the crisis was over, Europe would have to seek fresh ways to boost underlying economic growth as the financial sector would fail to play the role it had in the past.“I’m convinced that financial regulation will be broader and stronger. The financial system will be more regulated. This will mean less leverage, less flexibility in the financial system, and less influence for the financial system in . . . our economy.”

“Either we accept that our growth will be lower than in the past because the stimulus from the financial sector will be smaller, or we find more engines of growth in the non-financial side of the economy.”

Whatever course the EU chose, however, it would remain attached to its “social model,” which gives importance to providing benefits that shelter individuals in economically difficult times.

The Spanish EU commissioner for economic and monetary affairs cited other areas in which he thought the 27 EU states could act more effectively together.

Only a few hours before, publication of an expert panel’s recommendations to strengthen EU financial market supervision had highlighted areas where a more centralised approach was required.

Mr Almunia also sent a clear signal the EU stood behind eastern European economies, where the financial market crisis has intensified in recent weeks, and EU institutions have come under pressure to step-up help.

“The message is that Europe, regardless of where the EU’s border is, has a strong interest in and strong responsibilities for this region. The EU should pay more attention to this region, which is suffering more than average the consequences of the crisis.”

However, the scale of EU financial assistance to the region so far had not been fully appreciated. “It is a big, big effort.”

For eastern European countries that were not part of the EU, international institutions such as the International Monetary Fund were “more relevant”.

Mr Almunia spoke with greater care when it came to possible pan-European assistance for countries that are part of the 16-strong eurozone. Mr Almunia gave no blanket assurances, but hinted strongly the EU would again have to act as a union – rather than leaving eurozone members to turn to outside institutions.

The New York Times reports that the Obama administration ordered the nation’s 19 biggest banks on Wednesday to undergo stress tests to check whether they could hold up if the economy deteriorated further.

But analysts say the administration’s worst projections, which it describes as unlikely, are not much more dire than what many private forecasters already expect.

According to the new Treasury Department guidelines, the banks would have to assume that the economy contracts by 3.3 percent this year and remains almost flat in 2010. They would also have to assume that housing prices fall another 22 percent this year and that unemployment would shoot to 8.9 percent this year and hit 10.3 percent in 2010.

“I don’t think they are harsh enough,” said David Hendler, an analyst at CreditSights, who said the dire projection was itself too optimistic about the growth that would be generated from President Obama’s stimulus program. “That would be a pleasant outcome, but you have to plan for the worst.”

The average outlook of private-sector forecasters envisions the economy shrinking by 2 percent this year and unemployment peaking just below 9 percent in 2010.

The average forecast for housing prices is a decline of 14 percent this year and an additional 4 percent next year.

Recent forecasts by the Federal Reserve and most private forecasters have undershot the severity of the downturn.

Big banks — those with more than $100 billion in assets — will have to carry out supervised analyses by the end of April of how much their capital would be depleted under the Treasury Department assumptions. If federal banking regulators conclude that a bank would not have enough capital under those circumstances, the bank would have to raise the extra money within six months or get it from the government in exchange for ceding a potentially big ownership stake.

The Treasury Department also laid out the terms on which it would offer banks additional capital, and the formula could make the government a major shareholder in banks like Citigroup with only a modest additional infusion of capital.

The Treasury said that it would provide new capital in exchange for shares of preferred stock that could be converted to shares of common stock at a price slightly below the level at which the shares traded on Feb. 9. For many of the big banks, that price would be slightly higher than the quoted prices today, but still at rock-bottom levels compared with just one year ago.

In effect, analysts said, the administration’s offer of additional capital could set a floor on share prices of the major banks, which will now be able to raise more money at lower cost if the market value of their shares dropped below the levels on Feb. 9.

Administration officials, insisting that they want to avoid full-fledged bank nationalizations, left themselves wide discretion on how to interpret the results of the stress tests.

In a telephone conference call with reporters, officials from the Fed and Office of the Comptroller of the Currency said there would be no simple measure for “passing” or “failing” a test, and provided only vague descriptions of how they would interpret the results.

“It sure sounds to me like they are designing this to make it sound like the banking system is in great shape,”said Paul J. Miller, an analyst at Friedman, Billings Ramsey, a brokerage firm that specializes in bank stocks.

Administration officials said their intention was simply to make sure that the nation’s big banks would remain adequately capitalized even if the economic recession is substantially worse than expected.

They said their goal was to increase confidence of investors and depositors in the big banks, providing tangible evidence that the institutions would have enough money, whether they had to raise it from private investors or get it from taxpayers.

Administration officials said there was no cap on how much money a single institution could obtain, and they declined to estimate how much money the government would end up injecting before the crisis was over. Banks and other “qualified financial institutions,” which now includes investment banks and insurance companies that are part of bank holding companies, can start applying for more money immediately.

The Treasury Department has already used or allocated the first $350 billion of the $700 billion financial rescue program that Congress approved last fall.

Many analysts say the administration will have to ask Congress to authorize additional spending, though administration officials have declined to make any predictions thus far.

Christopher Whalen, managing director at Institutional Risk Analytics, said Citigroup and other major banks would almost certainly become insolvent once they absorb the full brunt of losses from the economic downturn.

“The stress test is about politics,”Mr. Whalen said.“The O.C.C. and the Fed already know the answer. The answer is that we’re going to have to come to a decision: are we going to put in more equity or are we going to resolve the banks through bankruptcy?”

Even as Treasury officials laid the ground rules for getting banks through the current crisis, President Obama met with lawmakers in Congress to begin discussions about a broader overhaul of how the financial regulatory system oversees risk in the future.

Emerging from the meeting, Mr. Obama said the first principle of a new system should be that financial institutions “that pose serious risks to the markets should be subject to serious oversight by the government.”

He also said that the regulatory system should be strengthened to withstand major stresses and that the government should take steps to rebuild trust in markets by promoting transparency.

The NYT also reports that President Obama will propose further tax increases on the affluent to help pay for his promise to make health care more accessible and affordable, calling for stricter limits on the benefits of itemized deductions taken by the wealthiest households, administration officials said Wednesday.

The tax proposal, coming after recent years in which wealth has become more concentrated at the top of the income scale, introduces a politically volatile edge to the Congressional debate over Mr. Obama’s domestic priorities.

The president will also propose, in the 10-year budget he is to release Thursday, to use revenues from the centerpiece of his environmental policy — a plan under which companies must buy permits to exceed pollution emission caps — to pay for an extension of a two-year tax credit that benefits low-wage and middle-income people.

The combined effect of the two revenue-raising proposals, on top of Mr. Obama’s existing plan to roll back the Bush-era income tax reductions on households with income exceeding $250,000 a year, would be a pronounced move to redistribute wealth by reimposing a larger share of the tax burden on corporations and the most affluent taxpayers.

Administration officials said Mr. Obama would propose to reduce the value of itemized tax deductions for everyone in the top income tax bracket, 35 percent, and many of those in the 33 percent bracket — roughly speaking, starting at $250,000 in annual income for a married couple.

Under existing law, the tax benefit of itemizing deductions rises with a taxpayer’s marginal tax bracket (the bracket that applies to the last dollar of income). For example, $10,000 in itemized deductions reduces tax liability by $3,500 for someone in the 35 percent bracket.

Mr. Obama would allow a saving of only $2,800 — as if the person were in the 28 percent bracket.

The White House says it is unfair for high-income people to get a bigger tax break than middle-income people for claiming the same deductions or making the same charitable contributions.

The officials said the resulting increase in revenues, estimated at $318 billion over 10 years, would account for about half of a $634 billion “reserve fund” that Mr. Obama will set aside in his budget to address changes in the health care system. The other half would come from proposed cost savings in Medicare, Medicaid and other health programs.

In a document summarizing its proposals, the White House said it would finance coverage for the uninsured in part by “rebalancing the tax code so that the wealthiest pay more.”

Mr. Obama’s blueprint, which will project spending and revenues for the next decade, will flesh out the president’s thinking on his energy plans both to cap the emissions of gases, particularly carbon dioxide, that are blamed for climate change and to spur development of nonpolluting energy alternatives.

The budget will show the government beginning by 2012 to collect billions of dollars in revenues from selling permits to businesses that emit the polluting gases, assuming the president’s energy initiative becomes law as soon as this year, officials said.

Because utilities and other businesses would presumably pass on their costs to customers, Mr. Obama will propose to use most of the government’s revenues from the permits to finance an extension of the new “Making Work Pay” tax credit beyond the two years covered in the $787 billion economic recovery plan that was just enacted.

That tax relief, the administration will argue, will offset households’ higher costs for utilities and other products and services from businesses’ passing on their permit expenses.

That tax credit annually will provide $400 to low-wage and middle-income workers or $800 to couples; Mr. Obama would like to increase those figures to $500 and $1,000. The credit phases out for those with incomes above $75,000 a year and for couples with incomes of more than $150,000; no benefit would go to individuals with more than $100,000 income and couples with $200,000.

The tax credit will begin showing up in the form of lower withholding for eligible workers beginning April 1.

The remainder of the projected revenues from the permits will finance Mr. Obama’s campaign promise for $15 billion a year over 10 years to subsidize research and development of alternative energy sources, officials said. The stimulus package included a multibillion-dollar down payment to develop a national electricity grid to harness and distribute energy from such sources, including wind farms.

Behind the numbers in Mr. Obama’s first budget is one of the most far-reaching domestic agendas in years, and at a time when the president and Congress are already grappling with an economic crisis worse than any in decades. The environmental permits would not take effect until 2012, at which point the administration expects the economy to have recovered. Similarly, some of the tax increases would not take effect until 2011.

Democratic Congressional leaders promised to push the agenda, which parallels their own. “By the end of this year, I want to do something significant dealing with health care,” the Senate majority leader, Harry Reid of Nevada, told reporters.

The tax proposals, however, could galvanize Republican opposition and give conservatives a concrete target for taking on Mr. Obama, who despite his political strength could find some members of his own party reluctant to embrace tax increases.

Senator Max Baucus, Democrat of Montana and chairman of the Senate Finance Committee, who has been drafting a health plan, predicted in an interview that the Senate could pass legislation by its August recess. Mr. Baucus acknowledged that “there has to be revenue” to offset the costs of expanded coverage initially, but he did not endorse the proposal for limiting wealthy taxpayers’ deductions.

“There will be lots of options to pay it, not necessarily that one,”Mr. Baucus said.

He would not say what revenue options he would support. But he said tax increases of some kind would not prevent some Senate Republicans from aligning with Democrats to pass a health plan.

In the House, the Republican leader, Representative John A. Boehner of Ohio, telegraphed his side’s opposition to any tax increases.

“Everyone agrees that all Americans deserve access to affordable health care,” Mr. Boehner said in a statement, “but is increasing taxes during an economic recession, especially on small businesses, the right way to accomplish that goal?”

Mr. Boehner likewise criticized Mr. Obama’s cap-and-trade emissions permits proposal, saying,“Cap-and-trade is code for increasing taxes and killing American jobs, and that’s the last thing we need to do during these troubled economic times.”

To finance health care reform, administration officials suggested to senior aides in Congress on Wednesday that revenues could be raised by ending the policy of excluding the value of employer-provided health insurance from income taxes.

But the officials emphasized that the administration was not advocating that option, which not only is anathema to some in organized labor and business but also conflicts with Mr. Obama’s position in last fall’s presidential campaign.

The administration is proposing a number of other politically contentious ways of offsetting the costs of the health care initiative. Mr. Obama wants to require drug companies to give bigger discounts, or rebates, to Medicaid, the health program for low-income people.

Drug makers now must provide Medicaid with a discount equal to at least 15.1 percent of the average manufacturer price for a brand-name product. Mr. Obama wants to require discounts of at least 22.1 percent. Pharmaceutical companies have strenuously resisted such proposals in recent years.

Mr. Obama will also propose cutting Medicare payments to health insurance companies that provide comprehensive care to more than 10 million of the 44 million Medicare beneficiaries. He says he can save $175 billion over 10 years with a new competitive bidding system, under which payments to private Medicare Advantage plans would be based on an average of the bids they submit to Medicare.