While investors cheered the Treasury Dept.’s $1.4 trillion bank bailout, taxpayers may end up jeering the plan, economists said.
The boos may rain down from Main Street, the economists said, if the government is forced to tax Americans to recoup any losses from massive bailout.
“The US Treasury is the best borrower in the world with the best credit for one reason,” said Chief Economist Scott Brown of Raymond James & Associates. “It has the ability to tax the richest society in the world.”
Brown and his colleagues up and down Wall Street said the Treasury was likely to look inward to raise money out of fear of wearing out its welcome with foreign nations – the usual customers when the US looks to raise funds.
Economists generally were confident that Paulson and his crisis swat-team of Bernanke and New York Federal Reserve Bank Tim Geithner could run a winning new offensive play to keep financial damage checked.
“They have the ability to keep the money supply from exploding,” said Senior Economist Mark Zitner of Wachovia Corp. “They’re not doing piece-meal defensive moves anymore, and are fully engaged on the offense until this thing is over.”
Raising or adding taxes is a likely – but not a foregone – conclusion. Treasury, which is expected to operate the fund which will own the toxic assets, could profit from the sale of the assets should the housing crisis abate and prices rebound.