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

Jeremy Kreisberg & Kelley O’Mara (Under the Supervision of Professor Howell Jackson)When the debt limit was raised on August 2, 2011, the Secretaryissued obligations to make the Civil Fund whole, conforming to thestatutory requirement of the Secretary of the Treasury to invest theamount suspended during the DISP “as soon as such investmentscan be made without exceeding the public debt limit.” 48 Thisnecessitated investing nearly $86 billion to account for the suspendedinvestments and reinvestments during the DISP. 49 Similarly, Treasuryinvested $9.5 billion in the Postal Fund to account for the suspendedreinvestment of maturing securities and interest. 50 The TreasuryDepartment also reinvested $17.1 billion of securities redeemedat the outset of the DISP from the Civil Fund. 51 The Civil Fundand Postal Fund were made whole on December 30, 2011, whenTreasury paid $516 million to the Civil Fund and $22 million to thePostal Fund, representing the interest foregone during the suspensionperiod and accrued since August 2. 522653. Reinvestment in the Exchange Stabilization Fund SuspendedIn keeping with precedent set during past debt limit negotiationperiods, 53 Secretary Geithner suspended reinvestments of the portionof the Exchange Stabilization Fund (“ESF”) held in U.S. dollars onJuly 15. 54 Congress appropriates funds to the ESF for a variety ofredeemed $462 million on Aug. 1, which represented the amount needed to make the remainderof the benefit payment from the Fund that day.485 U.S.C. § 8348(j)(2) (2006). “Any amounts in the Fund which, solely by reason of thepublic debt limit, are not invested shall be invested by the Secretary of the Treasury as soon assuch investments can be made without exceeding the public debt limit.” (emphasis added).49Report on Civil Fund, supra note 41. $86 billion comprised of $84,109,884,000 of principal(rollover investment planned for June 30, 2011) and $1,856,060,000 of interest accruedbetween July 1 and Aug. 1. Payment pursuant to 5 U.S.C. § 8348(j)(3) (2006), requiring theSecretary of the Treasury “to replicate to the maximum extent practicable the obligations thatwould then be held by the [Civil Fund] if the suspension of investment . . . and any redemptionor disinvestment . . . had not occurred.”50Id. Actions pursuant to 5 U.S.C. § 8909a(c) (2011) and 5 U.S.C. § 8348(j)(3) (2006). OnAug. 2, Treasury invested $9,533,347,000 of principal in the Postal Fund, representing theJune 30 payments not reinvested.51Id.52Id. Payment subject to 5 U.S.C. § 8348(j)(4) (2006), which requires the Secretary to pay thefunds the interest that would have been earned during the DISP on the first normal interestpayment date after the expiration of the DISP.53Dep’t of Treasury, Exchange Stabilization Fund Q&A (July 15, 2011) (available at http://www.treasury.gov/press-center/press-releases/Documents/07%2013%20ESF%20QA%202.pdf). Government previously suspended daily reinvestment of Treasury securities held in theESF during the debt limit impasses in 1996, 2003, 2004, and 2006.54Press Release, Dep’t of Treasury, Update: As Previously Announced, Treasury to Employ Fi-