Monday, January 14, 2013

John Carney — The Platinum Coin: The Legal Wrinkle That Killed It


It was the Fed that done TPC in. You know, "political independence."

CNBC NetNet

The Platinum Coin: The Legal Wrinkle That Killed It

John Carney | Senior Editor

4 comments:

Matt Franko said...

"The moneys held in the general fund of the Treasury, except the five per centum fund for the redemption of outstanding national-bank notes may, upon the direction of the Secretary of the Treasury, be deposited in Federal reserve banks, ..."

"may" not "shall"...

I'll have to run this by Mike for final approval of course, but I'm pretty sure that we would be more than willing to let the Treasury provide MNE the coin and MNE would deposit the $1T coin into the MNE bank account and in return we would be more than happy to act as a new, more cooperative fiscal agent for the Treasury than the Fed seems to be...

We would agree to use the proceeds of the $1T Treasury coin deposited at MNE for the purpose of redemption services for up to $1T of outstanding US treasury securities minus a small fee of course of $50 per <= $M of securities redeemed from the current holders. Upon receipt of the redeemed securities, we would simply forward the principle balances to the previous holders bank accounts from our MNE Treasury escrow account, and we would courier the certificates back to Treasury in DC... subject to... subject to....

Nothing to stop Treasury from seeking the services of an alternative fiscal agent for Treasury securities redemption that is more cooperative than the Fed, and contracting with them to provide future redemption services that would draw down a $1T Treasury escrow account at the firm imo...

rsp,



Ramanan said...

Matt,

Question: The Treasury can deposit coins at the Fed and receive an increase in its funds.

But if what Carney says is right, then even smaller coins are ruled out.

Anonymous said...

Carney strains at gnats and swallows a fly. Here is the paragraph he interprets.

"The moneys held in the general fund of the Treasury, except the five per centum fund for the redemption of outstanding national-bank notes may, upon the direction of the Secretary of the Treasury, be deposited in Federal reserve banks, which banks, when required by the Secretary of the Treasury, shall act as fiscal agents of the United States; and the revenues of the Government or any part thereof may be deposited in such banks, and disbursements may be made by checks drawn against such deposits." (Emphasis mine.)

Now, any English teacher that I ever had would say that both money from the Treasury's general fund and revenues may be deposited in Federal Reserve banks, and that checks may be drawn against those deposits. Carney supposes that checks may be drawn only against revenues deposited in the banks. I. e., that "such deposits" applies only to the latter. The linguistic problem with that interpretation is that there is are unambiguous ways to distinguish between deposits. E. g., "latter deposits", or "revenue deposits". There is, of course, a practical problem with that interpretation. What is the point of transfering money from the general fund of the Treasury to a segregated account in a Federal Reserve bank, where it will just sit there? None, of course. Big Duh!

Besides, it is easy to check. Does the Treasury keep segregated accounts at Federal Reserve banks for the two different types of deposits?

Matt Franko said...

Good point Bill.... rsp,