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— The government will sell $55 billion in bonds next week as part of a massive borrowing to pay for its financial rescue programs.
The Treasury Department said Wednesday it is bringing back its three-year notes, selling them monthly to help cover the increased borrowing needs, and will auction $25 billion of them on Monday. The government also will offer $20 billion in 10-year notes next Wednesday, and $10 billion in 29 3/4-year bonds on Thursday.
The government plans to borrow a record $550 billion in the last three months of the year to help pay for the various financial rescue packages put into effect in response to the global crisis. Officials project that the government will need to borrow an additional $368 billion in the first quarter of 2009, putting a sea of red ink in front of the incoming president, Barack Obama.
The Treasury also said it will offer 10-year notes in December and January.
The balance of financing requirements will be met by offering weekly Treasury bills, monthly 52-week bills, monthly two-year, three-year and five-year notes, and 10-year and 20-year securities, the department said.
The borrowing is needed pay for the array of government initiatives: The $700 billion rescue program enacted in early October; efforts by the Federal Reserve to bolster banks' balance sheets which have required it to use Treasury's borrowing resources; and the need of the Federal Deposit Insurance Corp. for funds to deal with a rising number of bank failures.
"Over the last several months, changes in economic conditions, financial markets and fiscal policy ... have contributed to an increase in Treasury's marketable borrowing needs," Karthik Ramanathan, the department's acting assistant secretary for financial markets, said in a statement.
In May 2007, shrinking deficits and smaller borrowing needs led the government to cease sales of the three-year notes. Now the financial rescue programs will force the government to borrow unprecedented amounts as the budget deficit climbs to record heights.
The Bush administration in July forecast that the deficit for the current budget year, which began Oct. 1, would hit a record $482 billion. But that forecast didn't include all the government's efforts since then to deal with the worst financial crisis since the 1930s.
The nonpartisan Committee for a Responsible Budget estimates all the government economic and rescue initiatives, starting with the $168 billion in stimulus checks issued earlier this year, total an eye-popping $2.6 trillion.
Supporters of the government rescue packages argue that the ultimate cost to taxpayers should end up being a lot smaller, partly because the Federal Reserve is extending loans to banks that should be paid back.
And in the case of the $700 billion rescue package, the government is buying assets — either bank stock or distressed mortgage-backed assets — that it hopes will rebound in value once the crisis has passed.
But the government still needs to borrow massive amounts to buy the assets, an effort that has driven up borrowing costs.
