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

Jeremy Kreisberg & Kelley O’Mara (Under the Supervision of Professor Howell Jackson)and the Executive Branch an additional eleven weeks to reach anagreement before the country would exhaust all borrowing authorityand face potential default on August 2, 2011. 212611. Issuance of State and Local Government Series TreasurySecurities SuspendedOn May 6, 2011, ten days before reaching the statutory debt limit,Secretary Geithner suspended the issuance of State and LocalGovernment Series Treasury Securities (“SLGS”). 22 SLGS are specialpurpose securities issued to state and local governments to providethem with a method for investing cash proceeds from their issuanceof bonds in compliance with federal tax laws and Internal RevenueService (“IRS”) arbitrage rules. 23 The suspension of SLGS sales iscommon in anticipation of a debt impasse, as these outstandingsecurities count against the debt limit and no statute requires theirissuance. 24 Suspending sales of these securities did not create anyheadroom under the ceiling, but it did slow the increase in theoutstanding debt, providing incremental time for negotiation. 25Following the increase in the debt limit on August 2, SLGS issuancesresumed. 262. Debt Issuance Suspension Period DeclaredWhen the outstanding debt subject to the statutory limit reached$14.294 trillion on May 16, 2011, Secretary Geithner notified21Letter from Timothy Geithner, Secretary of the Treasury, to Harry Reid, Democratic Leader,U.S. Senate (May 16, 2011) (available at http://www.treasury.gov/initiatives/Pages/debtlimit.aspx).22Letter from Timothy Geithner, Secretary of the Treasury, to Harry Reid, Democratic Leader,U.S. Senate (Apr. 4, 2011) (available at http://www.treasury.gov/initiatives/Pages/debtlimit.aspx).23Dep’t of Treasury, State & Local Government Series – Frequently Asked Questions (May 2,2011) (available at http://www.treasury.gov/connect/blog/Documents/05.02%20SLGS%20EXTERNAL%20QA%20FINAL.pdf).24Id. Issuance of SLGS have been suspended previously during debt limit impasses in 1995-1996, 2002, 2003, 2004, 2006, and 2007.25Id.26See Treasury Direct, SLGS FAQs, Dep’t of Treasury (available at http://www.treasurydirect.gov/govt/resources/faq/faq_slgs.htm),stating that SLGS issuances were suspended fromMay 6, 2011 – Aug. 2, 2011. See also Treasury Direct, Daily Treasury Statement, Dep’t of Treasury,Aug. 2, 2011, https://fms.treas.gov/fmsweb/viewDTSFiles?dir=a&fname=11080200.pdf (showing that on Aug. 2, $3.6 billion in SLGS securities were issued).