Barr Delivers Remarks at Hearing to Enhance Transparency Regarding Treasury’s X-Date Projection
Washington,
June 6, 2023 -
Today, the House Financial Services Subcommittee on Financial Institutions and Monetary Policy, led by Chairman Andy Barr (KY-06), is holding a hearing entitled “Uncertain Debt Management: Treasury Markets and Financial Institutions.”
Watch Chairman Barr’s opening remarks here.
Read Chairman Barr’s opening remarks as prepared for delivery:
“Thank you to our witnesses for joining us today in the Financial Institutions and Monetary Policy Subcommittee to discuss Treasury Markets and debt management.
“Markets for Treasury securities are integral to the functioning of financial institutions and the products they provide.
“Trillions of dollars in Treasuries trades occur each day in the private sector and with the Federal Reserve, through purchases, sales, repurchase agreements, securities lending, and more.
“Those trades help support provision of financial services, and they depend on a highly liquid, deep, and stable markets for various types of Treasury trades.
“Stability of markets for transactions involving Treasury securities has been at risk at various times, and Treasury security holdings of financial institutions recently came to the forefront in the form of bank runs and failures.
“The rapid escalation of interest rates engineered by the Federal Reserve, following a prolonged period of near-zero short-term interest rates, placed many Treasury security holdings underwater and markable to a loss at current market prices.
“That was at the heart of the failure at Silicon Valley Bank and subsequent banking system instability.
“Instability in markets for Treasury securities also began to arise given uncertainties surrounding the recent debt limit negotiations and our approach to a breach of the statutory debt limit.
“Today’s hearing is what I intend will be the first of several exploring markets for Treasuries, given the importance of those markets to financial institutions and the provision of financial services.
“During the debt limit debate, as was the case in prior debates when we got close to default, information from the Treasury Department, which is charged with debt-management responsibilities, was crucial.
“Yet, in trying to discern what was going on with respect to so-called extraordinary measures, which have become ordinary, and about the so-called X-date, Treasury was not as transparent as it could have been.
“In deciding something as important as a limit on federal debt that now stands close to $31.5 trillion, full information is necessary.
“Unfortunately, information is warehoused at the Treasury and sometimes kept behind closed doors, with the Treasury Secretary able to decide what information to provide and when to provide it whenever the Secretary wants to reveal information.
“That invites politics to enter into what the Treasury Department will tell Congress and the American people about the debt, how much cash is in the till, and how long the nation can stave off default.
“Only the Treasury knows best how long extraordinary measures are projected to last before we default.
“Only the Treasury knows best what the so-called projected X-date is, which is the date of default.
“Only the Treasury knows best how much cash it projects will be in the pockets of the American peoples till as we approach running out of cash to honor Treasury obligations.
“Only the Treasury, the Federal Reserve, the Federal Reserve Bank of New York, and the Administration know what contingency plans are in place to deal with an inability to make timely payments on Treasury securities and other federal obligations.
“To be clear, such contingency plans are necessary because an inability of the federal government to make timely payment can arise from a debt-limit impasse, but also from adversities such as a cyberattack, systems failures, natural disasters, or terrorist attacks.
“I have provided, today, discussion drafts of bills that address these issues, aimed at additional information provision and transparency about Treasury debt management and surrounding issues.
“Today’s discussion with experts from the Government Accountability Office and Congressional Research Service who have studied the debt limit and surrounding debt-management issues will help us discuss how to allow the American people and Congress to be better informed about federal debt management and information about our nation’s fiscal health.”
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