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

266The 2011 Debt Limit Impasse: Treasury’s Actions & The Counterfactual – What Might Have Happened if the National Debt Hit the Statutory Limitpurposes, including the stabilization of international financial marketsthrough the purchase and sale of foreign currencies. 55 Similar to theG-Fund, the portion of the ESF held in U.S. dollars is invested inspecial-issue Treasury securities, the entire balance of which maturesand is reinvested daily. 56 However, no statute requires the investmentof the ESF in Treasury securities. 57 By declining to reinvest thesecurities in this Fund, Treasury effectively lowered the outstandingdebt of the United States by $23 billion, providing much neededheadroom under the statutory debt limit. 58 This final maneuver sentan important signal that the country was close to exhausting itsborrowing authority. The date of this maneuver was concerning toat least one analyst, who predicted this final “extraordinary measure”would not be made until August 1, 2011. 59 When the debt limit wasraised on August 2, 2011, this portion of the ESF was reinvestedin Treasury securities, but the ESF is not entitled to, and did notreceive, foregone interest. 604. Federal Financing Bank Swaps Not UtilizedIn contrast to the 1996, 2003 and 2004 impasses, the Department ofTreasury did not elect to use the Federal Financing Bank (“FFB”) inorder to extend the nation’s borrowing authority. 61 Relevant statutesallow the Secretary to issue up to $15 billion in FFB obligations inexchange for other federal debt, including securities held by the CivilFund. 62 Since FFB securities do not count against the debt limit, thisnal Extraordinary Measure to Extend U.S. Borrowing Authority Until August 2 (July 15, 2011)(available at http://www.treasury.gov/press-center/press-releases/Pages/tg1243.aspx).55ESF Q&A, supra note 53.56Id.57Id.58Id.59Austin & Levit, supra note 2, at 26.60Gov’t Accountability Office (GAO), Financial Audit: Bureau of Public Debt’s Fiscal Years2011 and 2010 21 (Nov. 2011). As of Sept. 2011, the affected portion of the ESF amountedto $22,721,204,000.61Gov’t Accountability Office (GAO), Debt Limit: Delays Create Debt Management Challengesand Increase Uncertainty in the Treasury Market 9 (Feb. 2011). 5 U.S.C. § 8348(e) (2006)authorizes the Secretary of the Treasury to invest Civil Fund obligations in “other interestbearingobligations of the United States, if the Secretary determines that the purchases are inthe public interest.”62Id. at 7. 12 U.S.C. § 2288 (1973), “The Bank is authorized, with the approval of the Secretaryof the Treasury, to issue publicly and have outstanding at any one time not in excess of