Fed Preparing For US Default Says Plosser

Tyler Durden's picture

That giant whooshing, and humming, sound you hear are all the printers at the basement of Marriner Eccles getting refills and start the warm up process. Because according to the Fed Charles Plosser the Federal Reserve is actively preparing for the possibility that the United States could default. Which can only mean one thing: an immediate paradrop of millions of $100 bricks to every man woman and child in the US since as we all know by know Tim Geithner has repeatedly confirmed the Treasury has absolutely no default plans. None.

Per Reuters:

Philadelphia Federal Reserve Bank President Charles Plosser said the Fed has for the past few months been working closely with Treasury, ironing out what to do if the world's biggest economy runs out of cash on August 2.

"We are in contingency planning mode," Plosser told Reuters in an interview at the regional central bank's headquarters in Philadelphia. "We are all engaged ... It's a very active process."

Plosser said his "gut feeling" was that President Barack Obama and Congress will come to an agreement to increase the Treasury's borrowing authority in time to avert a default on government obligations.

And in addition to the warming up, the Fed is also engaging in the following:

The Fed effectively acts as the Treasury's bank -- it clears the government's checks to everyone from social security recipients to government workers.

"We are developing processes and procedures by which the Treasury communicates to us what we are going to do," Plosser said, adding that the task was manageable. "How the Fed is going to go about clearing government checks. Which ones are going to be good? Which ones are not going to be good?"

"There are a lot of people working on what we would do and how we would do it," he said.

Plosser added that there are difficult questions that the Fed itself had to grapple with.

The Fed lends to banks at the discount window against good collateral. But what happens if U.S. Treasuries no longer fit that bill?

"Do we treat them as if they didn't default, in which case we would be saying we are pretending it never happened? Or do we treat them as if they defaulted and don't lend against them?" Plosser said. "Those are more policy questions."s at the basement of Marriner Eccles getting refills and start the warm up process.

We urge the secretary of tax evasion to take a hint or two from his "Treasury Bank" brethren and start contemplating a Plan B since we now stand less than 48 hours away from D-Hour and there is still no consensus.

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slow_roast's picture

Are all my gold stocks going to go to infinity? 

Clueless Economist's picture

I advoke LOWERING the debt ceiling to 14 trillion.  But then agaib I got my economics degree from ITT Tech

SparkySC's picture

First Major Country to DEFAULT WINS!

 Think of the monster bets Govt's are making.

InconvenientCounterParty's picture

The gov't that borrows the most wins. Defaulting at this point in the game is pernicious nonsense.

QE3 is the Fed buying defaulted Treasuries and backstopping $20T in derivatives? mmm, sounds like they don't have a parachute or a helicopter.

Let's roll out the analysis of who voted for which debt increase and see who the heros and saboteurs are, shall we?


Quixotic_Not's picture

Bureaucrats and politicians have an extremely limited playbook consisting of taxation, regulation, and inflation.

These three ugly sisters of bureaucracy effectively serve to steal from people, make things more difficult for them, and rob them of their purchasing power… and yet they’re dressed up as solutions instead of problems.

Regardless of the scenario, Congress will reach deep into this playbook until they chase away every productive citizen and company they can…

In fact, it’s already happening.

Quixotic_Not's picture

Another PIMCO short on the U.S. Economy:


Are There Any Rungs Left
on the Housing Ladder?

  • It appears that limited mortgage availability and vulnerable consumer health are restraining demand.
  • Also weighing on the market is regulatory uncertainty over the future structure of mortgage finance and the resolution of foreclosure overhang.
  • We believe the housing market, considered to be a key driver of the economic recovery, will generally remain weak for the foreseeable future.
Though much has been made of the distressed supply overhang, we believe the demand side of the housing equation could more than overwhelm the impact of distressed housing supply. Absent a significant economic rebound or more dramatic policy response, housing demand will likely remain a drag on the housing market for the foreseeable future.
No housing recovery, no wage inflation = Zero, Zip, Zilch, -0- recovery. Good luck 'MeriKa, cause you're terminally ill... Here's one psychopathic parasite (aka Jimbo da RealTard) trying to spin this info, so he can continue flipping homes to suckers:
He ignores the fact that tough underwriting today has much to do with the lenders’ paranoia about buying back mortgages from Fannie/Freddie.  As we transition to private lending, the underwriting will make more sense.  You can already get a seven-year interest-only mortgage in the mid-4% range up to $2,000,000 with 20% down payment (and up to $1,000,000 with 15% down).
Doña K's picture

If fed and treasury start handing out Paulson style money, bet on Apple, Gold and Silver.

I just told my 15 year old daughter about this possibility and the next thing was:

"Can I have an ipad?"

Tunga's picture

NO gas grill for you! 

darkstar7646's picture

Only if you're outside the United States.

Three-fifths of all Apple sales are now foreign, and the other two parts of that triumverate WILL be confiscated fairly soon into the scenario.

Sudden Debt's picture

The Fed lends to banks at the discount window against good collateral.


Like they ever cared about "good collateral"!

They lend to every Obama contributor because it's the patriotic thing to do.



2012 = YEAR 1

Better make it as pleasant as possible and you'all should hold hands, sing KumBahJah while you'll all be deported to Mexico or to the saltmines.


Sathington Willougby's picture

At least a few around here can contribute by airbrushing Dr Paul's face out of pictures and such.

Maybe even a handful are literate enough to work in the Ministry of Bloginess revisionist tweeting dept.

Oh regional Indian's picture

SW, that is some awesome irony! Ministry of Bloginess Re-tweeter!


Ghordius's picture

You mean All heil to the Holy Squid Empire!

darkstar7646's picture

Why junk that? He's pretty close to correct.

How do you get out of this year or next without basically either repudiating the debt ceiling entirely, nationalizing The Second American Civil War (which has already started in some cities), and/or the dollar loses reserve status once and for all?

CompassionateFascist's picture

Not me. My silver in a JPM vault. Obviously the safest place for it. Just call me evil.

cara leaf's picture


EMAIL ADDRESSES OF CONGRESS & SENATORS (it’s 545 against 300,000,000—that’s million)


There are 545 of them against 300,000,000 of us!!!!   What is the problem? Of twenty-seven Constitutional Amendments, seven took under year to become law.  If you agree with this thesis, send our diatribe to twenty people. It’s more fun than Amway.  In three days most of America will have read it.

The 28th Amendment: 2012 Congressional and Senatorial Reform Act:

1. No Tenure. No Pension: Congressmen and Senators collect salaries while in office. That’s it. They do not receive pay, pensions, benefits or any other perquisites upon completion of their service.

2. The Congress and Senate will participate in Social Security. There will be no retirement entitlement programs legislated by themselves, for themselves.  Their retirement programs will be identical to those of the people who elected them. This will be retroactive. Congressional and Senate Retirement Funds will immediately transfer to the Social Security system; this effective upon the date of passage of this bill.

3. Congress and the Senate will not vote themselves pay raises. They are elected public servants, not kings and queens. Congressional and Senatorial pay hereafter follows the lower of either CPI, or 3%.

5. From date of passage forward, Congress and the Senate have the same health care options as those who elected them. Us. They’re our elected public servants, not kings and queens.

6. Congress will abide by the same rules and laws it imposes upon those who elected them. They are expressly forbidden to take cut-rate mortgages from Countrywide, Fremont, Goldman Sachs, Bank of America or Citigroup.

7. All past and present contracts with Congressmen and Senators are void as of January 1, 2012.

We, the people, ratified none of this. We had no representation to this flagrant flouting of The Constitution. We did not cast votes on politicians’ perquisites. We did not vote for eternal pensions of our other state and local public servants. Congressional and Senatorial service is an honor, not a career. Our Founding Fathers, envisioning citizen legislators who, upon serving their terms, returned to their families, went back to work and became citizens again. They would turn in their graves.

2012 Voters Bill of Rights and Responsibilities:

1-If you can’t read, you can’t be informed, therefore you can’t vote responsibly.  You are unqualified to make decisions that affect millions of others.  You are unqualified to choose who is most qualified to run our country.  I will not turn my country over to you.

2- Public assistance is not a lifestyle. No one stays on public assistance for more than two years. While on public assistance, you surrender the right to vote.  Without being vested financially in the public good, you have no ‘skin in the game.’  You are in survival mode, one where it is impossible to make impartial decisions about the public good.  Over 50% of Americans do not pay taxes.  It is unconscionable to let those on public assistance vote that those who are not, must support them.  (This does not apply to Veterans.)

3- You forfeit public assistance if you are so irresponsible that you continue to bear children you cannot afford to raise. You surrender public assistance if you bear more than one child you cannot afford. Both men and women are subject to this.  We did not agree, nor will we agree, to be responsible for paying the costs of raising children you cannot afford.  That’s your responsibility.  Not ours. The Fourteenth Amendment was not intended to allow children, born of illegal immigrants, citizenship.  You receive no benefits whatsoever if you are in this country illegally.  Every effort will be made to deport. It is far less expensive to deport than to support millions of families for one or two generations.

Diane Arbus, Crying Child

3. The intent of the Fourteenth Amendment was not to grant wholesale citizenship to the offspring of any immigrant who decides to come into our country illegally. You receive no benefits whatsoever, ever. You forfeit opportunity for future citizenship and/or naturalization. We refuse to sanction or protect those who flouts our laws. Every effort will be made to deport.  It is far less expensive to deport than to support millions of families for one or two generations.

Okay,  time for some fun!

And now!  Playing at a Theatre near YOU!  More fun than a barrel of monkeys, able to leap tall buildings in a single bound!  It’s truth, justice, and….

“Giant Political Email Links”   (see their great 007 website)*Send emails to every loudmouth talk show host in the world in one fell swoop!*Write Letters (full of propaganda) To The Editor of national newspapers (let’s just see how they like it) also in one fell swoop!*Let Hollywood & TV producers know exactly how you feel about all those crappy shows that cause brain cancer in miceall in one fell swoop!  Bill Owens, Suburbia


Get faxes & phones of all 545 U.S. Congressmen & Senators!  FOR FREE! Don’t sit around on weekends watching your kids get obese watching Resident Evil on the computer all day, make it a family affair! Let them join the party!  (Tell them it’s even better than Slaughterhouse!) We can annoy them even more than they can annoy us!  (No, not the children…the politicians.)The odds are on our side! BECAUSE IT’S 545 POLITICIANS vs. 300 MILLION TAXPAYING  (well, half of them anyway) CITIZENS…and if you still can’t figure it out for yourself, believe me, the odds could be a lot worse .
Here’s how you play.  Just follow the simple rules and in no time you’ll be having more fun than a barrel of monkeys!   It’s fun, it’s free and it’s All-American!  It might even get your kids out of their Bowling for Columbine clothes!  Just click on the name & VOILA!  It’s like Paris!Connect to congressmen’s and senators’ websites and fill out the message forms! Don’t forget to demand a reply. Include your address. Use our fax list with your modem or printer then paint the town RED… fax them all at once.  If you get in trouble, we’ll bail you out of jail! We’re here to help!  And our customer support actually speaks English!  The most effective way to contact these morons is by filling out their website message forms. Select a Congressman or Senator. Click. Send message!  But you’ll probably have to drive all the way to the actual Conservative Caucus because the links didn’t work here last time I tried!  And for those of you in the bleeding hearts crowd, forget the old line about conservatives against liberals…everything’s changed!  Now it’s US against THEM!

1-           Write ONE letter (and try to spell everything right)

2-           Cut & Paste this in every website form

;3-           Click.  Send! That’s all there is to it!  Soon you’ll have Pen Pals all over Washington, DC!   Send that letter to every one you can.


4-          Use their personal website forms (below; click on link; if it doesn’t work, go to our website; we promise, it won’t kill you. Not doing it will) or;

5-          Fax your letter but;

6-          Don’t use mail. They’re still looking for anthrax. You’ll be dead before security clears your stupid letter.

Send as many letters–to as many of them–as you can. Tell your friends you do not discuss the state of our country unless they have proof they’ve written at least one letter. We must do this.  Sociopaths are very intuitive.  They know there’s no political will when you won’t EVEN WRITE THEM A SINGLE LETTER!!  What would YOU THINK IF YOU WERE THEM?  You’d print some money, break out the Dom, invite some strippers and throw a big party! They think we’re just a bunch of p***sies.   And wearing you jaw out in Starbucks & sports bars is useless. If you have time to do that, you have time for the letter. A recent survey found politicians know if they don’t get letters they can control their victims even more!  It means WE ALL FEEL PARALYZED & think it’s NO USE!  There’s no reason for them to act in our interest. It’s the same thing that happened in Nazi Germany when the  oppressed were brainwashed into thinking they had no power. But they weren’t helpless at first.  Part of what killed them was waiting too long. And you, sir, are delusional if you think it can’t happen here.

William Eggleston, The Guide.

ebworthen's picture


I like it, but this will never happen until select members of CONgress are hung from the Capitol Dome and the blood of patriots is spilled on the Capitol Steps.


Hook Line and Sphincter's picture


It's becoming quite clear that COG is in effect. Has been for the past 10 years, but under the cover of half-smiles and soft hands. Watch, within the next year or two, you'll see the fraud that appears to be a functioning Congress brushed aside like the false vision it is, and replaced quite visibly by something that has no resemblance to a patriot.

Authoritarianism stringing us up hook line and sphincter 

Accidental Farmer's picture

For this to work, there would have to be a constitution and a republic in place....but there isn't. The government is a corporation, and we are all employees of that corporation. You have just as good a chance of going in to where you work, and telling your boss to vote himself a pay and benefits cut.

Freddie's picture

300 million are not paying taxes.  Probably closer to 40 million.  The rest enjoy the Hope & Change goodies.   The sheep watch TV and it is ALL the same - praise dear leader.

Havana White's picture

cara leaf:  Sandbox is thataway.


Tangurena's picture

Somehow, I think we can make a boardgame out of this. Start with Risk or Diplomacy, a pile of Monopoly money, some cards like UNO and the spinner from Nuclear War. I can imagine it now, play some "bet the country" or "too big to fail" card (like the 100MT bomb), get triple yield on the spinner and the whole world explodes!


cossack55's picture

With that degree you are overly qualified for SecTres.  If you can prove you have "cheated" on your taxes you can have the job for life.

dlmaniac's picture

<Warning: rant ahead />

It's like one guy farts, and it stinks. The next guy says he's more decent than that b/c he pulls down his pants first then he farts. What's the difference? It stinks just as much.

As for this "Fed working closely with Treasury" blah blah blah, we know they are running covert bailout, QE and guarantee 24/7. So what's the difference whether they reveal it or not?

Troublehoff's picture

Can I just compliment you on the correct use of your tag there.. with a slash at the end making it an open & close tag


..not like you'd use if closing off a rant


cheers for your strict adherence to ZHML

WmMcK's picture

You get junks for this?

What's the gripe, ZHML instead of X(A)ML?

Technical grammar nazis?

Doña K's picture

If treasury wants velocity, they should hand out money to the people as the article is saying. That will have a better effect on GDP and other economy metrics.

Oh regional Indian's picture

Velocity is the key. It could have been done in so many creative, main street positive ways, long ago.

Clearly the health of main street is not on the agenda. keeping main street alive is. barely at that.

Stimulous, it's really for the top of the pyramid. only.



Hook Line and Sphincter's picture

their covert bailout can be yours too if you act now

AU isn't just for breakfast anymore.

IQ 145's picture

 "advoke"--to choke while eating an advocado. possibly.

francis_sawyer's picture

But then agaib I got my economics degree from ITT Tech

...in your PAJAMAS, no doubt!

Widowmaker's picture

C'mon, even ITT Tech grads are getting robbed while ITT Tech sucks the giant government sponsored debt-for-education-for-political-pandering mammary gland in the sky.

nope-1004's picture

Plan B?  From an inbred fascist?

Nice try.  Geithner is complicit in the wealth transfer crime being played out before our very eyes.

Wisdom and intellect are two different things.  Those with wisdom usually carry a few morals around too.  Timmy may be smart, but he's an idiot.


sasebo's picture

Might I add pompous, pretentious asshole?

TruthInSunshine's picture

Default would be the greatest advent in American History since 1776, and mark a rebirth of the nation.

But it's not enough.

Each head of the Hydra that is the Central Bank must be lopped off with a razor sharp blade, and a Constitutional Amendment must be enacted returning the coinage of money (not Federal Reserve Notes, as it won't exist any longer, but Greenbacks) to the Congress, never to be delegated again.

Finally, a simple yet concrete Balanced Budget Amendment must be put into place, whereby the U.S. Government may not spend a single penny more than the revenue it receives, over any time horizon that exceeds on fiscal year.

We also need to, as a nation, completely kill the idea that any institution is "too big to fail."

Bring back fiscal constraint, kill the Fed and its gross distortion of markets and 'crack dealing whoredom' ways, let Wall Street and banks know that they will live and die by purely by their own decisions...

...and gut the 50% of government that is useless, dead weight on productive Americans, and institute a flat tax not to exceed 12% in total.


Quite a wish list? Yes.

Do these things, and America will be unstoppable with a growing, thriving middle class once again.


HellFish's picture


I think I love you!

Remo Williams's picture

So what are you so afraid.

Afraid that you're unsure of,

a love there is no cure for?

Lonewar's picture



You got it wrong, Its, "A love there is no Cure for?" =) And where the hell are you when this country really needs you, Chuin, and Smith...

Lee Marvin's picture

Thank you. Probably one of my favorites and best version! 

XPolemic's picture

Finally, a simple yet concrete Balanced Budget Amendment must be put into place, whereby the U.S. Government may not spend a single penny more than the revenue it receives, over any time horizon that exceeds on fiscal year.

I think that is a dangerous thing to wish for. Taxes could go to 110% of income under that plan.

TruthInSunshine's picture

And voters would know and retaliate in kind.

Ask George H.W. Bush (and that was nowhere approaching 110%).

Man Bear Pig's picture

Taxes could go to 110% of income under that plan

Care to share how/where you came up with 110? I smell troll...

Yen Cross's picture

  The libtard thinks he talking  GDP! Ignorance at it's best!  The kicker is, I could see that being spun... nice work M/B/P... +1

Captain Kurtz's picture

Throw in a non-essential consumption tax, whereby individuals with higher spending pay more since they use more of society (externalities, human resources, environment etc. etc.) and i'm sold.