U.S. Treasury Secretary Jacob J. Lew said a one-time payment from Fannie Mae confirms that the nation’s debt ceiling won’t be reached until September.
“The one-time payment that Fannie Mae has announced makes it very clear that we’re not going to hit the effective deadline until at least Labor Day,” he said in an interview on CNBC Television in London today. Fannie Mae, the mortgage financier seized by U.S. regulators in 2008, said yesterday it will pay the Treasury $59.4 billion after reporting a record quarterly profit driven by rising home prices and declining delinquencies.
The U.S. Congress voted at the end of January to suspend the nation’s $16.4 trillion debt limit through May 18, temporarily removing the risk of a default. With Fannie Mae’s payment and the use of so-called extraordinary measures, Treasury may have more time to push the deadline further.
“The statutory debt limit will be reached in just a few days” and “because of the extraordinary measures that are available and cash flows that we now can predict it will not be until at least after Labor Day,” Lew said, referring to the Sept. 2 holiday.
Treasury said on May 1 it can use “extraordinary measures” to meet its obligations and to stay under the ceiling “for a period of time after May 19.” A later deadline would give Congress more time to debate lifting the cap and postpone any vote until after the August recess. When the ceiling is restored May 19, it will be increased to reflect the government’s borrowing during the past few months.
On May 8, Freddie Mac, the U.S.-owned mortgage-finance company, said it will pay $7 billion to the Treasury Department after reporting the second-largest quarterly net income in the company’s history.
The Treasury can continue borrowing for several months by shifting money among government accounts. In the past, the U.S. has staved off hitting the debt limit with measures including declaring a “debt-issuance suspension period” under the statute governing the Civil Service Retirement and Disability Fund. That allows the U.S. to redeem existing Treasury securities held by that fund as investments.
The debt of Fannie Mae and Freddie Mac, to which the U.S. has pledged its backing without officially guaranteeing it, isn’t included in a tally of the U.S. government’s total.
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