May 3, 2011US Treasury to cut issues as May 16 debt cap nears
WASHINGTON: The US Treasury said on Monday it would begin cutting certain debt issues as it confirmed the government would reach its borrowing ceiling on May 16.
With Congress still not agreed on raising the ceiling to permit the government to continue financing its activities, the Treasury said it would stop issuing state- and local-government series securities on May 6.
"Because the United States is very close to reaching the debt limit, Treasury must take this action now," Treasury Secretary Timothy Geithner said in a letter to the leader of the US Senate.
"However, it is not without costs; it will deprive state and local governments of an important tool to manage their outstanding debt expenses," he said.
Geithner said that if Congress did not increase the limit, currently at $14.27 trillion, by May 16, the department will have to take "further extraordinary measures" to allow it to continue servicing the country's debt without default.
Without a debt-ceiling deal, Geithner said the measures could buy time, through about August 2 - three weeks longer than had been projected.
"Default by the United States on its obligations would have a catastrophic economic impact," he said.
Geithner said he intends to declare a "debt issuance suspension period" on May 16 if Congress does not increase the debt limit in time.
During the period the Treasury will stop issuing bonds to the civil service retirement and savings funds and, if necessary, to the government's exchange stabilisation fund.
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