Trillion is the new billion in borrowing totals

WASHINGTON — The government, raising cash to pay for the array of financial rescue packages, said Monday it plans to borrow $550 billion in the final three months of this year — and that's just a down payment.

Treasury Department officials also projected the government would need to borrow $368 billion more in the first three months of 2009, meaning the next president will confront an ocean of red ink.

The non-partisan Committee for a Responsible Budget estimates that all the government economic and rescue initiatives, starting with the $168 billion in stimulus checks issued earlier this year, total even more — an eye-popping $2.6 trillion.

In addition to the borrowing numbers, Treasury released estimates by major Wall Street bond firms projecting that total borrowing for this budget year, which began Oct. 1, will total $1.4 trillion, nearly double the previous record.

Major Wall Street firms were equally pessimistic about the size of the federal deficit this year. They projected it will hit $988 billion for the current budget year, more than twice the record. In July, the administration projected a deficit for this year of $482 billion, but that was before the financial crisis erupted in September.

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 to levels never before contemplated.

Meanwhile, the Bush administration is moving to get parts of the rescue package up and running. Two New York law firms — Hughes, Hubbard & Reed and Squire Sanders & Dempsey — were announced to process the mountains of paperwork that banks will be required to file. That will allow the government to monitor the operation of the $250 billion program to buy bank stock. Each law firm will receive up to $5.5 million for its work through April 28.

The law firms will be responsible for monitoring the filings of up to 1,800 eligible banks with publicly traded stock. In addition, 6,000 other banks whose stock is not publicly traded can apply for government purchases of their stock.