First Traitor who wants out: Tim Geithner considers leaving U.S. Treasury

Bloomberg
June 30, 2011

Treasury Secretary Timothy F. Geithner has signaled to White House officials that he’s considering leaving the administration after President Barack Obama reaches an agreement with Congress to raise the federal debt limit, according to three people familiar with the matter.

Geithner said speculation about his departure was being driven by his decision to commute to New York so his son can finish his final year of high school there.

“I live for this work,” he said at the Clinton Global Initiative in Chicago. “It’s the only thing I’ve ever done. I believe in it. We have a lot of challenges as a country. I’m going to be doing it for the foreseeable future.”

Geithner hasn’t made a final decision and won’t do so until the debt-ceiling issue has been resolved, according to one of the people. All spoke on condition of anonymity to talk about private discussions.

The Treasury secretary has said the U.S. risks defaulting on its obligations if Congress doesn’t raise the $14.3 trillion debt ceiling by Aug. 2. The administration and Republicans in Congress are at an impasse in negotiations to raise the limit, which is tied to efforts to cut the nation’s long-term deficit.

Moody’s Investors Service said on June 2 that it expects to place the U.S. government’s Aaa credit rating under review for a possible downgrade if there’s no progress on the debt limit by mid-July. Fitch Ratings said June 21 it would place the U.S. on a negative rating watch if no action is taken by Aug. 2.

Completing the Turnover

An exit by Geithner would complete the turnover in Obama’s original economic team, with Council of Economic Advisers Chairman Austan Goolsbee scheduled to leave in early August to return to the University of Chicago.

That would leave Obama with two key posts to fill as Republicans are seeking to turn the 2012 election into a referendum on Obama’s handling of the economy and as the recovery is slowing. The unemployment rate rose to 9.1 percent in May, according to the Labor Department, and the economy grew at a 1.9 percent pace in the first quarter, according to Commerce Department figures released June 24.

Jen Psaki, a White House spokeswoman, declined to comment.

“Geithner leaving may raise the level of uncertainty for the direction of economic policy, and that is never a positive thing for the markets and the recovery,” said Christopher Sullivan, who oversees $1.7 billion as chief investment officer at the United Nations Federal Credit Union in New York.

‘Shock Value’

Still, he said, it wouldn’t have too much “shock value,” especially if Geithner remains at Treasury until the debt ceiling is settled, “which is the most pressing concern anyone would have.”

Treasuries fell for a fourth day as stocks rose and a measure of U.S. business activity improved. The yield on the 10- year note climbed five basis points, or 0.05 percentage point, to 3.16 percent at 5:14 p.m. in New York.

Investors may be more interested in who would come after Geithner.

“The question in cases like this is always who will be the replacement,” said Jay Mueller, who manages about $3 billion of bonds at Wells Fargo Capital Management in Milwaukee. “You can’t judge if this is good or bad for the market until you see who follows.”

The market was “comfortable” with Geithner because he was “a visible player in trying to blunt the crisis,” Mueller said.

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U.S. Treasury to use Pension Funds to pay for Spending

CNBC

U.S. Treasury Secretary Timothy Geithner told Congress he would start tapping into federal pension funds Monday to free up borrowing capacity as the nation hits the $14.294 trillion legal limit on its debt.

The U.S. Treasury will issue $72 billion in bonds and notes on Monday, pushing the nation right up against its borrowing cap at some point during the day, a Treasury official said.

Geithner said he would suspend investments in two government retirement funds to give the U.S. Treasury additional room to borrow.

“I will be unable to invest fully” in the civil service retirement and disability fund and the government securities investment fund, he said in a letter to congressional leaders.

The Treasury has said the suspension of the investments and other measures it could take would give the government until about Aug. 2 before it will start defaulting on obligations, such as paying bond investors.

Congress is in charge of increasing the debt ceiling, but Republicans are demanding deep cuts to federal spending for the price of their support in doing so.

Geithner reiterated previous pleas for action. “I again urge Congress to act to increase the statutory debt limit as soon as possible,” he said.

U.S. Treasury asks for $2 Trillion more for Debt Ceiling

Reuters
May 4, 2011

The Treasury has told lawmakers a roughly $2 trillion rise in the legal limit on federal debt would be needed to ensure the government can keep borrowing through the 2012 presidential election, sources with knowledge of the discussions said.

Obama administration officials have repeatedly said that it is up to Congress to decide by how much the $14.3 trillion debt limit should be raised.

But when lawmakers asked how much of an increase would be needed to meet the government’s obligations into early 2013, Treasury officials floated the $2 trillion working figure, Senate and administration sources told Reuters.

Former Treasury officials have said it is routine for Congress to ask the Treasury Department for guidance. Republican leaders have asked the White House to provide the size of any proposed increase before the two sides sit down on Thursday to discuss the debt limit face-to-face.

“We have not specified an amount or a time frame. We think that should be left up to Congress,” Mary Miller, Treasury’s assistant secretary for financial markets, told reporters on Wednesday.

She also said it would be better to raise the debt ceiling enough so that the government does not bump up against it so frequently.

“Obviously, a longer period of time between these activities would be beneficial in terms of the work that goes into preparing for a debt limit increase. But again, you know that’s not the Treasury’s call,” she said.

A Reuters analysis of Treasury’s borrowing needs forecast Congress would have to raise the debt ceiling by more than $2 trillion to get through next year’s election without having to revisit the issue. According to the Treasury, the government borrows on average about $125 billion per month.