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

xxivPREFACEfinance the government: they cemented the political union, servedas a currency, backed the banking system, and helped attract foreigncapital. William Bratton, Richard Herring, and Zoltan Pozsarthen discussed the Treasuries’ role in the modern financial system,including corporate finance, banking and shadow banking in theUnited States and around the globe. While other reserve currenciesand assets may eventually displace the U.S. dollar and the U.S. Treasuries,none are readily available at this time, and some that haveserved as substitutes in the past (notably agency securities) ultimatelyrely on the credit of the United States.The second panel considered constitutional, statutory, and contractualdimensions of U.S. government debt. Michael McConnellopened with an examination of the U.S. Constitution as a fiscalframework based on legislative control of taxing, spending, and borrowing.Howell Jackson then returned to the statutory debt ceilingcontroversy, lifting the curtain on a plausible sequence of events hadthe President and the Congress failed to compromise as they did atthe eleventh hour in the summer of 2011. In addition to Jackson’sessay, this volume contains a policy brief by Jeremy Kreisberg andKelley O’Mara detailing the Executive’s options for honoring U.S.government payment obligations with the debt ceiling unchanged.Richard Squire concluded with thoughts on the market in creditdefault swaps on U.S. government debt.Peter Fisher gave the luncheon keynote, where he brought his perspectiveas former U.S. government debt manager, central bank official,and market participant to bear on the themes of the conference.Echoing the first panel, his remarks urged closer attention to thesources of demand for U.S. Treasuries both at home and abroad. Hesurveyed the experience of Britain in the 19 th century and Japan inthe late 20 th to identify some of the demand factors that help accountfor the ability of countries with very high debt burdens to avoid default.The focus on demand in the U.S. banking, shadow banking,and global financial systems suggests cautious optimism about theTreasuries’ prospects going forward.The first afternoon panel revisited the questions of U.S. ability andwillingness to pay, which has been debated heavily in policy and