The government’s $700 billion bailout of troubled financial institutions may actually end up benefiting taxpayers in the long run, analysis by Barron’s has claimed.
According to the business newspaper’s Monday edition, the Treasury Department is likely to actually turn a profit as a result of the bailout in the coming years, which – if it comes to pass – would also be good news for taxpayers.
The article suggests that the mortgages and mortgage securities involved in the deal "aren’t as toxic or widespread as commonly assumed."
By purchasing these mortgages, the Treasury will provide a boost to credit markets and improve the prices of securities supported by home loans, Barron’s says. This could help prevent further decline in the real estate market.
Commenting on the potential effects of the government’s actions, Jeffrey Gundlach, chief investment officer of TCW, told the news source that "there’s a good chance that the bailout plan will be a win-win for both the taxpayer and the financial system."
However, not everyone is convinced that government intervention is a good idea. Reuters reported that one venture capitalist, Bill Perkins, bought a full-page advertisement in the New York Times last Tuesday to protest the action.
He told the news provider that the U.S. has become "a socialist-communist country in the form of trickle-down communism."