Nation May Not Have To Raise Debt Ceiling Until Fall

According to US Treasury Secretary Jacob Lew, the nation will likely not be forced to raise its debt ceiling until "at least" Labor Day, thanks to an upcoming payment of nearly $60 billion from Fannie Mae and the use of "extraordinary measures".

Lew warns, however, that politicians should engage each other and focus on an agreement to raise the debt ceiling now, rather than waiting until the last minute once again. I think it's safe to say that an early agreement won't happen.

The United States gained a bit more breathing room yesterday when Fannie Mae announced that they will be paying the Treasury $59.4 billion after reporting a record quarterly profit. The company, which received heavy support from the federal government during the darkest days of the "Great Recession", benefited from a one-time accounting move and a recovery in the US housing market.

In addition, the country can utilize "extraordinary measures" to gain even more time even after its debt ceiling limit is hit. These "extraordinary measures", which have been used a couple of times over the past few years, allows the federal government to continue to operate for a short period of time even after it has reached its debt ceiling.

The country is currently operating under 127 Stat. 51, which was enacted on February 4th, 2013. This statute suspended the existing debt limit from February 4th, 2013 to May 18th, 2013, and "prospectively increased the limit to accommodate the increase in such debt outstanding as of May 19th, 2013".

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According to some reports, the nation may not have to actually raise its debt ceiling until October or even November.


Filed under: General Knowledge