US Government Debt Different - Finance Department - University of ...

Charles W. Mooney, JrCourt of Federal Claims to recover a money judgment. That courthas exclusive jurisdiction over claims against the U.S. based on contract.134 But it is not clear what role the recognized holders wouldplay after default in respect of the other holders (i.e., the recognizedholders’ account holders to which they had credited Treasuries). Inthe intermediated holding system in the U.S., an intermediary hasno duty to its account holders to pursue a defaulting issuer of debtsecurities. This is so whether the intermediary holds through a FederalReserve Bank or through another intermediary (such as a centralsecurities depository), or whether the intermediary is itself a centralsecurities depository that is the registered owner of the securities onthe books of the issuer. In the world of corporate and municipal debtsecurities, however, there normally is an indenture trustee chargedwith enforcement on behalf of the holders; it is not a holder’s intermediarythat is charged with that responsibility.217Recognized holders would have little motivation to take enforcementaction following a U.S. default on Treasuries except to the extent thatthey hold Treasuries on their own behalf (i.e., proprietary holdings)as opposed to holding for their account holders. Moreover, if U.S.domestic holders’ Treasuries were exempted from default, domesticrecognized holders would have no motivation to enforce, other thanas a courtesy or for relationship reasons, on behalf of their accountholders who hold nonexempt Treasuries. On the other hand, a holderof non-exempted Treasuries would be free to move the securitiesto an account with a recognized holder that would be willing to enforceon the holder’s behalf. In particular, foreign recognized holdersmight be willing to act on behalf of their non-exempted foreignaccount holders.134 28 U.S.C. § 1491(a)(1) (2011) (“The United States Court of Federal Claimsshall have jurisdiction to render judgment upon any claim against the United Statesfounded either upon the Constitution, or any Act of Congress or any regulation ofan executive department, or upon any express or implied contract with the UnitedStates, or for liquidated or unliquidated damages in cases not sounding in tort.”)See also Gross v. Griffin, 800 F. Supp. 2d 293, 299 (D. Me. 2011) (“This grant ofjurisdiction to the Court of Federal Claims is exclusive, but ‘only to the extent thatCongress has not granted any other court authority to hear the claims that may bedecided by the [Court of Federal Claims].’”) (quoting Bowen v. Mass., 487 U.S. 879,910 n.48 (1988)); Wagner v. U.S., Dep’t of Hous. & Urban Dev., 835 F. Supp. 953,958 (E.D. Ky. 1993), aff’d, 43 F.3d 1473 (6th Cir. 1994) (holding that the Courtof Federal Claims has exclusive jurisdiction over breach of contract claims againstthe United States).