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

Jeremy Kreisberg & Kelley O’Mara (Under the Supervision of Professor Howell Jackson)measure could have created some additional breathing room as thenation approached the ceiling. 63 However, the outstanding balanceof FFB securities already amounted to $10.2 billion in May 2011, 64leaving less than $5 billion of opportunity for potential swaps. Onthis ground, Secretary Geithner dismissed the option of using FFBsecurities in a swap as a valid extraordinary measure in April 2011. 65Additionally, the prudence of this maneuver has been questioned, asTreasury officials now say that they can no longer reverse these FFBtransactions once the debt limit is raised because of the potentialsubstantial costs that both the FFB and its counterparties couldincur due to unexpected interest rate changes. 662675. Selling Assets to Raise Revenue Not Seriously ConsideredTo fund appropriated expenditures without raising new taxes orissuing new debt, some suggested that the United States should sellits financial assets. 67 In May 2011, a Morgan Stanley report estimated$15,000,000,000, or such additional amounts as may be authorized in appropriations Acts,of obligations having such maturities and bearing such rate or rates of interest as may be determinedby the Bank.”63GAO, supra note 61, at 7.64Treasury Direct, Monthly Statement of the Public Debt of the United States, Dep’t of Treasury(May 31, 2011) (available at http://www.treasurydirect.gov/govt/reports/pd/mspd/2011/opds052011.pdf). FFB balance totaled $10.239 billion.65Geithner, supra note 22, at fn. 14, stating “The potential to use such an exchange transactionis of limited use at this time because the FFB has a limited amount of obligations available tothe exchange.”66GAO supra note 61, at 11-12. See also General Accounting Office, Analysis of Actions Takenduring 2003 Debt Issuance Suspension Period 12, 25-29 (May 2004), stating that the risks, suchas unforeseen interest rate changes, related to transactions between the FFB and Civil Fundmay be substantial. “According to FFB estimates, the Civil Service fund lost interest of over$1 billion on a $15 billion transaction in October 2002 when the FFB decided to redeemearly its 9(a) obligations that were issued to the Civil Service Fund. These obligations relatedto Treasury’s efforts to manage the debt during the 1985 debt ceiling crisis, and the losses occurredbecause of (1) the unexpected early redemption by FFB and (2) unforeseen interest ratechanges.” The Secretary of the Treasury does not have statutory authority to restore these typesof losses. Further gains and losses are hard to estimate.67U.S. Should Sell Assets Like Gold to Get Out of Debt, Conservative Economists Say, Wash. Post,May 12, 2011, http://www.washingtonpost.com/national/economy/us-should-sell-assets-likegold-to-get-out-of-debt-economists-say/2011/05/12/AFIvmI4G_story_1.html.In additionto gold, some commentators suggested that the United States sell land, interstate highwayproperty, or utilities.