Tuesday, October 8, 2013
President Obama: Forget "The Coin"
Just listened to the President's press statements and the topic of "the coin" came up and he indicated he won't try it due to the legal risk of a negative court ruling on the validity of the coin.
31:00 minute mark at this link....
Beowulf has indicated that a dispute about the validity of the coin should not be a difficult legal case to make as the FRA provides very specific language wrt dispute resolution between Treasury and their fiscal agent the Federal Reserve System; the Secretary's position takes precedence.
So much for the actual laws of our nation.
He used the "household" analogy too a couple of times in the press conference.
Looks like we are going to have to wait until the last possible moment to find out how this current fiscal impasse will end.
Meanwhile, $NFA injections have been running at a baseline rate of about $6B per day under the "shutdown" which is about $5B below that which was being conducted previous to the "shutdown".
Look for continued orderly liquidation until some sort of continuing resolution is passed which will most likely get baseline $NFA injections back above $10B per day.
No compromise seems in sight until at best the October 17th date that Sec. Lew has indicated is the date that Treasury will cease to have the ability to "pay the bills".
Hang in there everyone.
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15 comments:
US politicians have pulled this debt ceiling stunt too many times for me to believe that they will actually allow a default to occur.
*yawn*
Right Bob,
Just figure out the last possible moment for a resolution to avoid a catastrophe and that's when it will get solved...
Right now that looks like Oct 17th.
Set your alarm clock for the 17th...
rsp,
They have to go the wire or even a bit over the wire to satisfy the Tea Party base they need to win elections. If the Tea Party gets fed up with the GOP, which it sees as always caving to the Establishment in the end, they will go back to the Libertarian Party — which is likely to happen some time anyway unless the GOP becomes the Libertarian Party.
Obama has a good point about the coin. It doesn't matter whether the legality of the coin will eventually be upheld in court. The very fact that there will be a court challenge will be a massive distraction that will shift the political burden from the Republicans to Obama. Only 10% of people will have the background to understand what the issue is and how the law works. Much of the other 90% will easily be convinced that Obama is an out-of-control tyrant who has engaged in a wholly unprecedented and constitutionally dangerous exercise in unilateral executive monetary coinage. Obama should keep the focus on Republicans. The message should be, "Raise the debt ceiling, or the US government defaults. And when that happens it will be on you"
I'm sure that the president and his advisors have investigated and discussed the options in great detail and made their choice. So be it. Coulda, woulda, shoulda useless after that. Leadership is about making choices.
Obama is presenting this to the country as a constitutional issue. Do they want government by hostage taking or not. So far the polling is a resounding NO.
The GOP is going to try to paint the president as intransigeant and unwilling to negotiate. His answer is that he won't negotiate with hostage takers while they are holding the hostage. Under the constitution, it is up to Congress to deal with this, not the president, which means that the House and Senate have to approve a bill to send to the president, who has already said he will veto a bill that isn't clean.
Now we are going to see who is going to blink. The pressure is mounting high on the GOP from powerful forces within in the party. Polling also shows the GOP slipping. The odds greatly favor the president holding tough even if it results in a temporary default, since the GOP is very likely to take this at least down to the wire.
"Only 10% of people will have the background to understand what the issue is and how the law works. Much of the other 90% will easily be convinced that Obama is an out-of-control tyrant who has engaged in a wholly unprecedented and constitutionally dangerous exercise in unilateral executive monetary coinage."
Dan - Probably more like only 1% or less of people will understand the issue of the coin. In fact even a good number od that 1% will probably confuse it with Bitcoin. Aside from that I'd say you nailed it. The Obama administration is probably much more concerned about international markets crashing the $ and the Treasury market if the $1 trillion platinum coin is put in play than any legal argument.
I think he said that TPC wasn't a long term solution. It doesn't fix the constitutional problem in congress. He didn't say that he wouldnt do it and left the 14th open as well. Just doesn't like it.
Beowulf was looking into who would have standing to bring the lawsuit... it maybe would be the Fed...
Here is Beo:
"And who exactly would have legal standing to challenge the 14th Amendment (or trillion dollar coin) strategy? Are bondholders going to sue Tsy for paying its bills and satisfying its creditors? I don’t think anyone can get Tsy in court to challenge their policy. As for the Fed losing its independence, the tie goes to the secretary rule wasn’t added by Ron Paul, its been in FRA since the law was passed. You can’t lose what you never had."
Would the bond holders sue for default when the Treasury would actually pay the required coupon or redeem as required by the terms of the security issue?
who would bring the lawsuit that the Admin is so afraid of?
And it is evident that the Admin is afraid of the "bond vigilantes" just like the Clintonistas were...
sad state of affairs all around...
He is worried that people won't buy treasuries if he mints the coin? If he mints the count he won't need to issue bonds for nearly 2 years
No he's worried about the political fallout.
Well Dan he cant be worried about what it would do to his re-election chances...
I think Ryan makes a good point in that O indicated some concern for the terms the govt would receive in subsequent bond issues and to Ryans point such future issuance would not be required...
So couple this with his repeated references to the household analogy and it paints a picture of an administration that simply does not understand the basics of public finance at the Federal level...
That said I agree that it would be best at this point to put it back on the GOP, use the coin if the GOP cray cohort actually goes thru with the default scenario, which at this point imo still has above a zero probability...
rsp,
Matt, the political angle has nothing to do with the next election. Obama is embroiled in a political fight with the Republicans for the hearts and minds of the US public on the right approach to the debt ceiling. Right now, all the polls show it is clearly advantage Obama, since he is the one who looks like the reasonable one and his antagonists look like reckless yahoos. If he goes off the script and does something dramatic that involves a completely unprecedented and controversial use of executive power, then he loses that advantage. His winning argument with the Republicans on the debt ceiling will be swamped by a whole new Washington controversy and media firestorm about "Coin-gate" or "14th Amendement-gate", and Obama is the one who goes back on the defensive.
I'm pretty sure that if the president would take extraordinary means to skirt the debt ceiling, the House would impeach him. Of course the Senate would never remove him from office, but it would occupy the headlines for the rest of his terms and continue to hobble government, which is what the GOP desires when the are out of power.
I agree Dan to do this type of thing with the coin now would be bad timing, good point...
But I would hope he would keep this perfectly legal option 'in his back pocket' in case the 17th comes and we still have no ceiling increase...
rsp,
But I would hope he would keep this perfectly legal option 'in his back pocket' in case the 17th comes and we still have no ceiling increase...
He might be doing that, Matt. But I don't think he wants to telegraph the options.
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