Re:I Got the Fed to Release Its 2011 "Treasury Default" Play...
by JumpCrisscross on Tuesday November 07, 2023 @05:07PM
(#38183647)
> Treasury can write a check, but that check is to be drawn against an account in an actual bank -- ordinary commercial banks
The Treasury banks with commercial banks, but it also has an account at Fed. That said, banks aren't legally obligated to accept its cheques.
> an additional player, the Federal Reserve
That's what this memo describes [1]. In essence, the Fed says it will defer to the Treasury on whether debt is legally issued.
> Treasury sells some bonds to the Fed
The Fed can't do that [2]. What they can do is announce to the market that they won't treat post-ceiling debt differently from pre-ceiling debt. That's what this memo says.
It may not be able to continue doing that if e.g. SCOTUS rules Treasury exceeded its authority. But at that point, the Treasury could start testing its minting power.
In summary, the Fed isn't a player in the legal part of this game.
The Treasury banks with commercial banks, but it also has an account at Fed. That said, banks aren't legally obligated to accept its cheques.
> an additional player, the Federal Reserve
That's what this memo describes [1]. In essence, the Fed says it will defer to the Treasury on whether debt is legally issued.
> Treasury sells some bonds to the Fed
The Fed can't do that [2]. What they can do is announce to the market that they won't treat post-ceiling debt differently from pre-ceiling debt. That's what this memo says.
It may not be able to continue doing that if e.g. SCOTUS rules Treasury exceeded its authority. But at that point, the Treasury could start testing its minting power.
In summary, the Fed isn't a player in the legal part of this game.
[1] https://www.federalreserve.gov/monetarypolicy/files/FOMC2011...
[2] https://www.federalreserve.gov/faqs/money_12851.htm