updated 11/3/2008 4:59:45 PM ET 2008-11-03T21:59:45

The government will borrow a record $550 billion in the current quarter as it scrambles to fund the huge rescue programs being put in place to deal with the worst financial crisis in seven decades.

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The Treasury Department said Monday it plans to borrow more than a half-trillion dollars in the current October-December quarter and another $368 billion in the first three months of next year.

Major Wall Street bond traders estimate the government's borrowing needs for the whole year will total an unprecedented $1.4 trillion.

The bond traders predict that borrowing will be needed to cover a budget deficit that will approach $1 trillion for a single year. The major Wall Street firms are projecting a deficit of $988 billion in the current budget year, far above the $482 billion estimate that the Bush administration made in July.

The administration's estimate was before the crisis in credit markets this fall prompted the government to put together a $700 billion rescue package aimed at getting money to banks through government purchases of their stock and some of their bad assets. The goal is to bolster banks' balance sheets to prompt them to resume lending.

A deficit of $988 billion for the current budget year, which began Oct. 1, would be more than twice the record $454.8 billion set for the budget year that ended Sept. 30.

The size of the government's borrowing needs and the projected deficit underscore the dramatic challenges that will be faced by the next president.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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