Why Is The US Treasury Suddenly Concerned About "Loss Of Market Access"

Tyler Durden's picture

Earlier we revealed that one of the key topics of discussion during yesterday's quarterly meeting of the TBAC committee with government workers (including Under Secretary for Domestic Finance Mary Miller, Assistant Secretary for Financial Markets Matthew S. Rutherford, Deputy Assistant Secretary for Federal Finance James G. Clark, and Director of the Office of Debt Management Fred Pietrangeli, and two NY Fed staffers, Nathaniel Wuerffel and Lorie Logan) was whether or not markets had become far too complacent, there was another, even more important topic of discussion than simply the beaten dead horse which is the fate of manipulated stock markets.  The topic: the US Treasury suddenly losing access to capital markets.

This is how the Treasury framed the discussion:

Pursuant to the Committee’s request at the April meeting that Treasury present a cash balance management framework that mitigates certain risks, DAS Clark began his presentation by reviewing Treasury’s current cash balance objectives.  He explained that Treasury’s main sources of cash are susceptible to risk, noting that Treasury has historically focused on risks associated with errors in fiscal forecasting.  Clark stated that several events had made it clear that market access and settlement risks could also potentially impair Treasury’s ability to fund government expenditures for several business days.


A detailed discussion ensued amongst Committee members around the benefits and potential concerns related to holding a higher cash balance in order to mitigate the consequence of losing market access.  The Committee concluded that it would be cost effective and prudent for Treasury to hold a higher cash balance.  They suggested that Treasury should continue to analyze the details of maintaining a higher cash balance and present its findings at an upcoming TBAC meeting.

In other words back in April, the US Treasury for reasons unknown, tasked the TBAC to consider levels of cash funding needs for the US treasury as a result of "certain risks."

Specifically as a result of "several events" among them the December 2, 2013 delay of a 4 week bill auction due to IT issues, Super Storm Sandy in October 2012, and September 11, 2001, the Treasury has suddenly - five years into the recovery - gotten concerned that its ability to fund government expenditures for "several business days" could be "impaired."

As examples of market disruption, the Treasury mentions two: Hurricane Sandy: 1.5 days and September 11th: 2-3 days.

The TBAC then responds that the "Cash required to cover the worst 1-5 days since FY2009 is relatively constant at approximately $331 billion."


Here is what the TBAC finds: "Historically, Treasury has only had enough cash to withstand a loss of market access for approximately 2 days."


  • Treasury would have been protected against losing market access for 1 day roughly 80 percent of the time.
  • Treasury would have been protected against losing market access for 5 days less than 10 percent of the time.

But it is the TBAC's punchline that is most important:

If Treasury lost market access for a short period of time, the U.S. government would face a substantial cash shortfall.

  • Since the beginning of the financial crisis, on average, Treasury would have faced an $28 billion cash shortfall if market access had been lost for 3 days.
  • This shortfall increases to $89 billion if market access had been lost for 5 days and $239 billion if market access had been lost for 10 days.

* * *

Summarizing the story so far: after years of never even once contemplating how much cash the US Treasury has on eht books, suddenly, 5 years into the "recovery" the Treasury is suddenly very concerned about the level of statutory cash. Why? Fears over loss of "market access" such as those during a "glitchy" 4 week bill auction in December 2003 (implication: malicious hackers) or September 11 (implication: domestic terrorism accident).

And what is probably most disturbing is the TBAC's ultimate answer to the TSY's question whether it should hold more cash: 

The Committee concluded that it would be cost effective and prudent for Treasury to hold a higher cash balance.

Just in case, surely. Still, one wonders, do they know something we don't, and just what was unreported during the "framework discussion" phase, and just how long until the Treasury tests out its increased cash retention strategy, and most importantly: just what upcoming event could to the Treasury "losing market access"?

* * *

Full TBAC presentation (pdf)

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Headbanger's picture


What I've been saying here for months that the Federal Reserve knows it is fucked now cause the U.S. dollar is losing global currency status because the world wants to starve the U.S. military beast.


PartysOver's picture

Beats me.  But  thinking they are trying to addres a concern without mentioning the concern directly.  Instead they use excuses like Hurricane Sandy.   After all they can't put e truth out there.

nope-1004's picture

Every addict is concerned about how and when they can get their next fix.  The US is totally reliant on, and addicted to, other nations accepting its toilet paper / MIC duo.  What a shitty spot to be in, if you're in the Treasury.


kliguy38's picture

absolutely correct. Its the whole enchilada for the ponzi......its over soon

IANAE's picture

Attention passengers - please return to your seats and fasten your seatbelts...

Thought Processor's picture



We are slowly moving towards a dislocation event of some sort, that much is clear.  And once the tipping point is reached it will either be utter chaos or it will be like time stopped (as they suspend FED operations, temporarily of course).


Maybe both.



knukles's picture


sung to "here comes santa claus"

Banking holiday, banking holiday
When the markets be closed
You can't sell bonds or bills or notes
To get the cash you owes

max2205's picture


gh0atrider's picture

With Satoshi never lose funds!  Do you get me simple fucks?

SoberOne's picture

Get to work, chairsatan!

kaiserhoff's picture

Translation into English.

No one wants the Treasury's stinking bonds at anything close to the Fed's stinking rates.

Stinking Fed, meet Mr. Market.

AldousHuxley's picture

Like an old general, reserve currencies don't crash...they just fade away

wallstreetaposteriori's picture

Listen Fonestar... Just because you created a new account with a new name doesn't mean that people are going to listen to you.

gh0atrider's picture

fonestar's PAL was forced to create a new account because fonestar was B.A.N.D.

Bollixed's picture

fonestar was banned because he always referred to himself in the 3rd person...

gh0atrider's picture

gh0atrider is always three peoples too.  The Cryptofather.  The Bitson and the holy Genesis Block.

Rusty Shorts's picture

Fonestar - 

BITCOIN IS NOW A TAXABLE ASSET - IRS Says Bitcoins are Property and Not Currency



gh0atrider's picture

What if government tells you the sky is a gh0at?  And that you look at it all bad, wrongly?  So do you submit and unquestionably stumble towards consensus?

Rusty Shorts's picture

I've gone on to Scarboro, oak seed millet rash. stick to the code.

Uchtdorf's picture

That's exactly right. If a cool 200 million of us mouth-breathing, cousin-marrying, knuckle-dragging troglodytes living in fly-over country would just die, the Treasury wouldn't have any cash shortages.

pods's picture

Well, you would still have to pay tax when you are dead, but we get the idea.


Calmyourself's picture

Calling LTER, tell us again why we pay taxes when we are dead??

gh0atrider's picture

gh0atrider cousin live in fly-over county.  All count good!  Phvck you physman!

JRobby's picture

Hey Boson, those Tbills you put up for collateral last month matured 3 weeks ago. How about a little something, ya know, for the effort?

Save_America1st's picture

maybe they should stack up on some phyzz Ag and Au?

naaaaaaaaaaaaahhhhhhhhhh.....PM's are just barberous relics. ;-)

1000924014093's picture

If I had a Krugerand for every time I've heard that on Zero hedge, I'd be able to give Deutschland it's gold back.

Landotfree's picture

The global system relies on the U.S. expanding its money supply at an exponential rate.   Another way of putting is the world is dependent on the expansion of the U.S. credit/debt system at an exponential rate... what a shitty spot the world is in.... eventually peak, collapse and liquidation of the walking unfunded liabilities.  

dontgoforit's picture

Which is why Russia, China and India are on the hunt to find away out of this maze of craze money ponzi.

Landotfree's picture

There is no out.... there is only in.   Good luck.  My guess... more walking unfunded liabilities will be liquidated there (Asia) than anywhere else.  (Popcorn ready)

"Seems like every time we meet I've got nothing but bad news. I'm sorry about that, I surely am. But for what it's worth, you've made a believer out of me. Good luck, kiddo." - The Oracle (The Matrix Reloaded)
itchy166's picture

Hotel California Economics...

pods's picture

If our system of settling trade (money) did note require exponential expansion, we COULD get along without a mass die off.

Our energy system would have to change, but we (even here) cannot imagine how things would look if we did away with the growth meme.

So I absolutely agree with things breaking, but I think the final outcome is up for debate.  


Landotfree's picture

"If our system of settling trade (money) did note require exponential expansion, we COULD get along without a mass die off."

Correct.  There would be other problems as is life, but you wouldn't necessarily need a liquidation phase like we will eventually face.   Unfortunately, man did start a system and they continue to recycle the system over and over.... with some thinking there will be different outcome.   2+2=4

My guess 1-2 billion will have to go, another dark age or complete wipeout is not out of the question as efficiency of the liquidation phase has further gone up exponentially i.e. nuke and chemical weapons.

"Denial is the most predictable of all human responses. But, rest assured, this will be the sixth time we have destroyed it, and we have become exceedingly efficient at it." - The Architect (The Matrix Reloaded)

Notsobadwlad's picture

Makes sense .. 6th root race deleted in the 6th destruction of Zion.

From what I have read, the plan is for minimum of 2 to 2.5 billion.

El Vaquero's picture

Whether 1-2 billion have to go or 5-6 billion have to go depends on if we are able to put an alternative in place for fossil fuels.  There are potential alternatives, but they are only partially developed and the infrastructure for running them is not in place.  I'm just glad I'm not going to be in China or India when this shit-show moves onto the next act.


Whatever the case, in a decade's time, none of us will recognize the world. 

Colonel Walter E Kurtz's picture

Just as long as every military stays away from leveling the ghost cities. Some of us are going to need a quick ready made place to be able to relocate to. And I do not think I am going to be one of the lucky ones, but I need some of you to carry on our species. I would hate to let the cockroaches win. Safe travels my fellow man.

Urban Redneck's picture

Bank Holidays Ahoy!

Good to know they're not planning on more than 5 days exclusive of weekends and holidays...

JLee2027's picture

I thought the Treasury was the Capital market. Am I wrong?

Spitzer's picture

Sort of. Listen to the king world news interview with Andrew Huzsar. He says that the Fed will have to ask for money from the treasury when they start making losses on interest on bank deposits

boogerbently's picture

Have the banks cover the "losses". We covered them.

Save_America1st's picture

yeah, they'll cover them all right...by "bailing in" and stealing all the private accounts. 

Get out of the banking system, "Folks"...get out now while you still can and before those "gates" are completely closed. 

pods's picture

"We ball gagged and drilled some folks' puckered starfishes until it was turned inside out."



El Vaquero's picture

"We pinksocked some folks."

BlindMonkey's picture

The first ones out the door with their money are the only ones that will be whole.

pods's picture

Depends if "their" money belongs to a private bank.


El Vaquero's picture

You know the system is perverse when banks have over $2 trillion of freshly created digital FRNs in excess reserves and those FRNs are considered a liability.

JRobby's picture

Bail In!

Fuck you all!