Thread: Government Draws On $14.3 Billion From Retirement Funds

It's Official: DTS Discloses Total Debt Hit Ceiling Yesterday; Government Draws On $14.3 Billion From Retirement Funds

Submitted by Tyler Durden on 05/17/2011 16:16 -0400
245 comments

While it won't be a surprise to anyone at this point, seeing it in black on white is about as startling as hearing that one's credit card has been denied. Yesterday, following the settlement of all of last week's auctions, total debt held by the public increased by$51.4 billion, just as we had predicted, bringing the total to $9.717694 trillion. And with the total debt subject to the ceiling maxed out legally by $14.294, Tim Geithner reported a total of $14,293,975 MM, $25 million away from the ceiling. What was the plug? Why "Intragovernment Holdings" of course, which declined by $14.3 billion. As Tim Geithner warned yesterday this is now money held in retirement trust funds, which is now being directly sacrificed in order to keep the ceiling from breach: "I will be unable to invest fully the portion of the Civil Service Retirement and Disability Fund (“CSRDFâ€

$14.294 trillion in the red, so US Treasury must stop borrowing

By Guy Adams in Los Angeles
Tuesday, 17 May 2011

After months of hand-wringing, the US Government has reached its debt limit, forcing lawmakers to embark on a series of emergency measures to prevent public finances from going into immediate default.

A tranche of roughly $72bn in bonds and notes issued by the US Treasury yesterday left the national coffers exactly $14.294tr in the red, meaning that there is for the time being no capacity for additional public borrowing. The Treasury Secretary, Timothy Geithner, said he would pull an accounting trick, suspending investment in two large federal retirement funds and allowing the Government to meet its financial obligations until 2 August.

In the meantime, lawmakers must negotiate a deal that will see the debt ceiling raised. If they fail, the US will default on trillions of dollars of bonds, potentially plunging the world economy into meltdown.

Part of any agreement will be efforts to balance a budget that has been in the red since shortly after Bill Clinton left office.

Vice-President Joe Biden has been holding negotiations with lawmakers from both parties over the types of deficit-cutting measures that need to be approved to win congressional approval of a higher debt limit. However, a solution still appears elusive, with politicians divided along party lines.

Republicans say they will only countenance deep spending cuts as a way to achieve a balanced budget. "Everything should be on the table except raising taxes," the House Speaker, John Boehner, said at the weekend.

Democrats, on the other hand, would prefer to let Bush-era tax cuts for the super-wealthy expire, and to end tax breaks for the largest oil companies. They believe that would save the Treasury about $4tr.

President Barack Obama warned last week: "If investors around the world thought that the full faith and credit of the United States was not being backed up – if they thought that we might renege on our IOUs – it could unravel the entire financial system."

The US Congress has set the country's debt limit since 1917. Although it has from time to time seen difficult negotiations, the issue has rarely been used as a political football.

Unlike governments in many developed economies, the Obama administration has chosen not to slash public spending following the credit crisis, in the hope that the extra economic activity would create jobs and increase tax revenues.

http://www.independent.co.uk/news/world ... 85025.html

US raids civil service pension fund as it hits $14.3 trillion debt limit

The US has suspended payments into a civil service pension fund to free up almost $150bn (£92bn) as the major debtor nation approaches its legal borrowing limit.

By Richard Blackden 7:09PM BST 16 May 2011
241 Comments

Timothy Geithner, the US Treasury Secretary, announced the move in a letter on Monday to Congressional leaders as he explained that the move extends the government's breathing space to August 2 to avoid an unprecedented default on its borrowings.

The US Treasury expected to reach the $14.3 trillion limit on on Monday. Congress needs to raise the legal debt ceiling beyond its current limit, which will require Republicans and Democrats reaching agreement over an issue that bitterly divides them. President Barack Obama warned over the weekend that failure to raise the ceiling risks unravelling the world's financial system.

Given US government debt, or Treasuries as they are known, are considered the safest asset in financial markets and held by investors and central banks around the world, few want to imagine the consequences of a default.

"No one in the Treasury market really expects a default," said Bill O'Donnell, a strategist at UBS. "But people are doing up their seatbelts as the rhetoric will only increase over the summer and it could go right to the wire."

America's debt has become a sharp dividing line between the two parties and will be in next year's presidential election. John Boehner, the Republican leader of the House of Representatives, wants The White House and Democrats in Congress to agree to trillions of dollars in spending cuts before Republicans give the nod to any increase. Joe Biden, the vice-president, has been tasked with leading negotiations between the administration and leaders on both sides of the aisle in Congress.

"If investors around the world thought that the full faith and credit of the United States was not being backed up, if they thought that we might renege on our IOUs, it could unravel the entire financial system," President Obama said late on Sunday.

The debt limit dates back to the Second Liberty Act of 1917, which while giving the US government extra power to borrow to fund its entry into the First World War, also set a ceiling to the amount of public debt the country should have. It has been increased several times since.

The US said that the retiree funds will be "made whole" once the ceiling has been raised and former government workers won't be affected.

http://www.telegraph.co.uk/finance/econ ... limit.html