Department of the Treasury
As we continue to approach the October 17 deadline when the Treasury Department estimates that extraordinary measures will be exhausted, leaving Treasury with a dangerously low cash balance to finance new government obligations, the bond market is getting more and more nervous about lawmakers' ability to avoid hitting the debt ceiling.
Feeling the Heat – As most of us return to work this week nursing sunburns and swapping stories of grilling glory, the heat is on in Washington, at least on one side of Capitol Hill. Senators are out of town this week, but Representatives are working on appropriations. Meanwhile, the debt limit deadline continues to draw closer.
Bumping Up on the Debt Ceiling – On Monday, Treasury Secretary Tim Geithner sent a letter to congressional leaders saying that his department this week would begin the “extraordinary measures” necessary to stave off a U.S. default absent an increase in the statutory debt limit, which will be breached around May 16.
Brackets – As many busy themselves today going over the brackets for the big tourney, picking the next Cinderella and who will win it all, the real challenge for prognosticators remains predicting how the budget impasse will pan out. The budget process has gotten uglier than the 68 team bracket and all the moving parts – FY 2011 spending, the FY 2012 budget and the debt limit – make the road to Houston look like an easy jaunt.
Last month, we reported the positive developments that were happening with the major players--GM, Citigroup, and AIG--still left in the Troubled Asset Relief Program (TARP). In November, Citigroup had fully repaid all the assistance it had received in various TARP programs, GM had significantly reduced Treasury's ownership stake in itself, and AIG was in the process of an exit plan.
Wall Street banks have been drastically cutting their holdings of U.S. Treasuries, according to Bloomberg News. According to most analysts, this is a reaction to expectations of a stronger economy, which is leading banks to invest more heavily in private equities as opposed to Government bonds. While this is certainly good news, it does highlight the risk that U.S.
Yesterday the Federal Reserve announced it would be paying a record $78.4 billion to the U.S. Treasury for 2010. It accumulated this large sum from interest on its holdings of risky assets, like mortgage-backed securities, that it acquired during the financial crisis. The Fed's policy dictates that it turn over this money to the Treasury at the end of each year.
The Treasury Department released Tuesday its annual Financial Report of the U.S Government. The report highlights the nation's budget deficit, net operating costs, debt projections, and all government liabilities on an accrual accounting basis. To sum it up, the report shows us how big of a hole we're truly in.