Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Government Officials Scrambling for Debt-Issuance Ideas if Ceiling Not Lifted
Wall Street Pit.com ^ | July 29, 2011 | Charlie Gasparino

Posted on 07/30/2011 3:56:03 AM PDT by Son House

Government officials are scrambling to come up with ways to sell debt even if the nation’s debt ceiling isn’t raised by early next week, though officials are remaining silent on just what course of action they might take, and it’s unclear if any of the options discussed would be enough to meet the country’s massive borrowing needs, the FOX Business Network has learned.

The issue of how to borrow outside the debt limit emerged during a regularly scheduled, though timely meeting, Friday between officials at the Federal Reserve, the Treasury Department and 20 banks that buy US debt.

Government officials hold meetings with Wall Street dealers prior to bond auctions, like the one that is scheduled to take place on Monday. But this meeting took on special significance since on Tuesday the Treasury is scheduled to run out of money to pay all the nation’s bills unless the debt ceiling is lifted as part of a budget deal in Washington.

By midday Friday, such a deal remained elusive, which prompted government officials to discuss with Wall Street ways in which the Treasury could raise money if the debt ceiling isn’t raised anytime soon. Sources at the meeting said the participants discussed three options, but the one that seemed most plausible involved the issuance of so-called “cash management bills,” which are short-term IOUs that allow the government to raise money outside the debt limit since these bills are quickly repaid once tax revenues are collected.

Government officials and the Wall Street executives also discussed holding smaller auctions than usual, and only selling bonds when older issues mature so as not to sell debt above the $14 trillion debt limit. Dealers said such a move could be disruptive to the market.

Another option discussed was to sell bonds on a “when issued” basis, meaning the Treasury sells the bonds to investors, the securities are free to trade and the auctions where money is delivered to the government officially begin when the debt ceiling is finally hiked.

In this scenario the government would be guaranteed the money once the budget impasse ends, but dealers said such a move would be nearly impossible to pull off because the market couldn’t price the securities thanks to uncertainty of the timing of when the auction will eventually occur.

A Treasury spokesman said “today’s meeting allowed Treasury to continue its regularly scheduled conversations and provided an opportunity for all dealers to share their views on Treasury market functioning and the auction calendar in advance of August 2.”

Sources who attended the meeting said the Treasury provided no guidance about a course of action, other than to say that the August 2 deadline assigned by Treasury Secretary Tim Geithner is a real one, despite some reports stating that the government won’t run out of money until the following week.

One Wall Street executive at the meeting suggested that Treasury “repo” its portfolio of mortgage-backed securities, which it purchased from Fannie Mae and Freddie Mac during the 2008 financial crisis. In a “repo” trade, the Treasury would temporarily raise cash by selling the securities and buying them back at a later date. The Treasury holds just under $100 billion of mortgage-backed securities from the bailout of Fannie Mae and Freddie Mac.

Government officials offered no response to the suggestion.


TOPICS: Business/Economy; Front Page News; Government; News/Current Events
KEYWORDS: ceiling; debt; issuance; scrambling
the one that seemed most plausible involved the issuance of so-called “cash management bills,” which are short-term IOUs that allow the government to raise money outside the debt limit since these bills are quickly repaid once tax revenues are collected.

When you owe so much you can't afford to pay the bill, why would you think someone wants to be stuck with your debt?
1 posted on 07/30/2011 3:56:04 AM PDT by Son House
[ Post Reply | Private Reply | View Replies]

To: Son House

Nobody in DC wants to correlate the rising debt ceiling with declining jobs.

The rising debt ceiling has two consequences....

more regulation ...

to occupy employees in expanding federal bureaucracies...which expand because “they have more money” and another layer of bureaucrats need their 20 year promotions... Each round of regulatory expansion is the effective equivalent of another targeted tax increase on the object of the regulation.

more taxes...

The rising debt ceiling has demands and expectations of creditors for new elements of “revenue raising” by the Feds...taxes or fees.

In this strangling environment job creation is simply NOT possible.

In fact the only logical conclusion..can be ..is that the Federal apparatus -initially an asset to the United States..by virtue of its abilities to raise an effective Navy in the late 1700’s, and early 1800’s to facilitate overseas trade on behalf of the States, has become nothing other than the States greatest liability at this point in time. In the absence of profound regulatory and taxation reform-which is not capable of coming from the same minds that created the problem..we may well be at the end of the line.

For DC to face this fact...means the end of the K St-Congressional Party cycle in DC


2 posted on 07/30/2011 4:12:52 AM PDT by mo ("If you understand, no explanation is needed; if you do not, no explanation is possible")
[ Post Reply | Private Reply | To 1 | View Replies]

To: Son House

Some of those who have owned businesses have learned the hard way that CREDIT can not be used to fund CURRENT EXPENSES.

If it is, the company is in a spiral of debt that will end in bankruptcy.

In effect, it is a ponzi scheme, just using debt instead of equity.

The Federal debt is 7 times what the Federal government takes in in 1 year.

The Federal government spends about 50% more than it takes in every year.

Anyone - Republic or Democrat - who says the “reasonable” thing to do is provide more debt is speaking utter nonsense that 3rd grade arithmetic refutes.

No matter what they say, and no matter what ratings agencies say, in the very near future, anyone who has U.S. dollars will not trade them in for U.S. Treasury debt, because to do so would be to give one’s money away.

There is very little prospect of being able to glean any more in taxes out of the economy. The wealthy and large corporations have bought off all but 22 members of Congress, so they will not have their tax “loopholes” (which are really tax deductions and credits that are completely public information and were passed into law by Congress, including those who rail against them) closed to allow their taxable income to rise. The middle class who is shouldering the heaviest load, relatively, can not afford any more and is also madly calling their Congressman. And the rest are actually receiving money back from the government in exchange for their vote, so no voting changes are coming from that block.

So until spending comes down, in total, real, actual dollars (not some Washington scam talk), to about $2 trillion, there is no way the Federal government can begin to pay back the over $14 trillion that it owes. Spending reductions will not be pretty, but spending will go down. Kind of like a very bad skier - it’s not pretty, but they get down the hill.

The Federal government is on the path the default and we will see all sorts of craziness in the near future, as the gears of the great government giveaway debt ponzi scheme come crashing and grinding to a halt.

This disaster was brought to you by the American big-government idiots of the past 100 years, thank you for watching another episode of “The Collapse of Empires”, and have a nice weekend.


3 posted on 07/30/2011 4:32:17 AM PDT by PieterCasparzen (We need to fix things ourselves)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Son House

Washington has gone nuts.

We have too much debt, so the answer is to find new ways to borrow?

The loonie birds are running the asylum.


4 posted on 07/30/2011 4:34:46 AM PDT by Cringing Negativism Network (We are not tea partiers ... we're good tea partiers. Life-long tea partiers)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Son House

Isn’t this more or less the principle behind check kiting?...


5 posted on 07/30/2011 4:37:19 AM PDT by Cringing Negativism Network (We are not tea partiers ... we're good tea partiers. Life-long tea partiers)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Son House

Give all the existing debt holders a 1% haircut. That will raise 1.7 trillion available.


6 posted on 07/30/2011 5:33:11 AM PDT by Raycpa
[ Post Reply | Private Reply | To 1 | View Replies]

To: Cringing Negativism Network

No, kiting is illegal


7 posted on 07/30/2011 5:34:03 AM PDT by Raycpa
[ Post Reply | Private Reply | To 5 | View Replies]

To: Son House

What we are witnessing is a drug addict trying to get his next fix.

Our goverment is a drug addict and our politicians are the pushers.

This has got stop.


8 posted on 07/30/2011 6:36:48 AM PDT by TMA62 (Al Sharpton - The North Korea of race relations)
[ Post Reply | Private Reply | To 1 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson