How exactly is the American taxpayer going to pay, directly or indirectly, for the $700-billion bailout package?
The U.S. government’s treasury will likely borrow the $700-billion from the public, corporations and perhaps other national governments, by issuing bonds and treasury bills. They will then use this money to buy, at a discount, the distressed assets from the financial institutions that are in trouble. The hope is that when these assets are eventually sold, they could bring in a substantial return to the government, and possibly even make a profit. If it works out as planned, the process should not cost the taxpayer anywhere near $700-billion. Because the process of selling the assets will take time, there should be no impact on the U.S. budget deficit in the short term. If the government eventually takes a loss on the assets it is buying, then it will deepen the deficit down the road.
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