Treasury reduces 3Q borrowing estimate to $406B
WASHINGTON — The Treasury Department on Monday reduced its borrowing estimate in the current July-September quarter by $109 billion, some rare good news about the government’s financial needs.
Borrowing will reach $406 billion in the third quarter, the department said, down from its April estimate of $515 billion. The projected borrowing, while significant, is below the record $530 billion it borrowed in the same period in 2008.
Treasury also said it borrowed $343 billion in the April-June quarter, less than the $361 billion it projected in April but still a record for that period.
The improvements — at least compared with last year’s record levels — are due to several factors, including the repayment of $70 billion in June by 10 large banks and a number of smaller ones as part of the federal rescue program.
In addition, the department said it expects to provide less assistance to the financial sector and to mortgage giants Fannie Mae and Freddie Mac than previously forecast.
Treasury also said it expects to borrow $486 billion in the October-December quarter, down from a record $569 billion in the same period last year.
The recession and the $700 billion bank rescue program enacted last year caused government borrowing to skyrocket. The longest recession since World War II has cut into tax revenue and spurred increased spending on social programs such as unemployment insurance and food stamps.
The department said increased spending from the Obama administration’s $787 billion stimulus package and lower tax receipts will drive borrowing in the near future.
The White House projects the deficit will hit $1.85 trillion for the budget year ending Sept. 30, a record that would quadruple last year’s all-time high gap of $455 billion.
The government released its estimate of borrowing needs before a news conference Wednesday when officials are scheduled to detail how much debt the government plans to sell next week as part of Treasury’s regular quarterly debt auctions.
The government in February said it was bringing back the seven-year note and doubling the number of 30-year bond auctions it would hold each year to help finance the surging borrowing needs.
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