Does the bailout plan involve a tradeoff?

Answer:

Yes. the bailout plan can be considered a kind of trade off.

This plan can be described as a risky investment, as opposed to an expense. The MBS (Mortgage Backed Securities) within the scope of the purchase program have rights to the cash flows from the underlying mortgages. As such, the initial outflow of government funds to purchase the MBS would be offset by ongoing cash inflows represented by the monthly mortgage payments. Further, the government eventually may be able to sell the assets, though whether at a gain or loss will be known only in future.

so the trade off is between the risk that the government and the Fed is taking and the rewards that the economy might get out of it.

First answer by Anandvijayakumar. Last edit by Anandvijayakumar. Contributor trust: 782 [recommend contributor recommended]. Question popularity: 1 [recommend question].