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Fed is ready to buy defaulted Treasuries, so debt ceiling matters little
Biden Can Steamroll Republicans on the Debt Ceiling
By Nathan Tankus
Politico, Washington
Wednesday, April 19, 2023
The threat of a real debt ceiling crisis is growing rapidly. House Republicans are still pushing steep spending cuts that the White House won't countenance, even as the Republicans remain deeply divided on a strategy. And we're now as little as eight weeks away from the "X date" when the Treasury Department no longer has legal authorization to issue new securities and fill up its checking account.
It's past time for the White House to consider their unilateral options for avoiding economic disaster more seriously.
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Perhaps the most prominent proposal to sideline Congress calls for the Treasury to mint a trillion-dollar platinum coin and deposit it with the Federal Reserve, ensuring the government has plenty of money to pay its bills. So far Treasury Secretary Janet Yellen has rejected the idea, warning that the Fed might not accept the coin and that, in her view, the central bank is not legally obligated to accept it.
There are other ideas floating around, but the one thing they all have in common is that they rely on the Federal Reserve's cooperation and its willingness to continue acting as the government's "fiscal agent" -- essentially its banker, a role established by the Fed's statute. ...
Despite the Federal Reserve's uneven record on transparency, it does eventually release transcripts of some of its most critical meetings in the years after they happen. And in an October 2013 conference call, Fed officials discussed a memo with options for how to respond to a government default.
On that call, Powell and most of his colleagues reluctantly endorsed buying defaulted Treasury securities -- an unprecedented move to maintain financial stability -- if a legislative debt ceiling solution did not come in time. ...
... For the remainder of the analysis:
https://www.politico.com/news/magazine/2023/04/19/powell-debt-ceiling-fed-00092522
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