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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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Wed, 08/06/2014 - 15:01 | 5055252 disabledvet
disabledvet's picture

So the Fed is doing a reverse repo...sticking all the monetization back to the treasury. So what you say sounds about right to me. Also sounds "constrictive" to the economy...like the US Banks being forced to raise capital ala 2008 (and Europe everywhere now) so now the Treasury is doing the same thing.

Seems strange to say "great time to go long a steel mill" but it's not like there is zero demand out there. Size of the US Navy could grow quite large and quite suddenly here.

Wed, 08/06/2014 - 15:09 | 5055286 Muh Raf
Muh Raf's picture

Er, about as wrong as every other issue you like to spout about

Wed, 08/06/2014 - 17:18 | 5055955 JLee2027
JLee2027's picture

I admit when I'm wrong, which is why I asked. Can you say the same?

Didn't think so looking at your biography. Jew hater extreme.


Muh Raf

Ardent anti-zionist campaigner for over 25 years. Is more interested in overthrowing the zoharite banker owners of zionism, which is just one of their many fronts.

Member for
2 weeks 6 days
Wed, 08/06/2014 - 23:03 | 5057293 oudinot
oudinot's picture

Stick to the topic.

No one cares how long someone has been a member.

Wed, 08/06/2014 - 14:50 | 5055176 Landotfree
Landotfree'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."

Sorry buddy, there is no switch to startup the fictional backup system,.   The world is stuck until the end of the cycle, then liquidation of the unfunded walking liabilities, my guess 1-2 billion have to go, wake me up in 25-50 years to show me the new false messiah (medium of exchange) after the end of this cycle.  

Wed, 08/06/2014 - 16:57 | 5055866 Omen IV
Omen IV's picture

2.5 Billion worldwide of which they want 160 million left in USA for the Murder by Neglect Program

Wed, 08/06/2014 - 14:52 | 5055187 Eyeroller
Eyeroller's picture

Dear Santa Claus,

     I realize this is extremely early, but I have been a good girl all year, and I really, REALLY need an early present of a Black Swan.  Any of the following will do:

     Ebola break-out.

     ISIS takes over US Embassy in Bagdad and cuts off a few heads.

     Hamas assassinates Kerry during a mid-east visit.

     Russia sends the troops into Ukraine and NATO responds in kind.

     Or something else creative.

     I would deeply appreciate being able to deflect blame from the Fed for the coming crash.

Kisses and Hugs,

Janet, the Ponzi Munchkin


Wed, 08/06/2014 - 15:16 | 5055313 knukles
knukles's picture

If "Hamas assassinates Kerry during a mid-east visit." which side celebrates?



             not a trick question

Wed, 08/06/2014 - 15:29 | 5055381 Save_America1st
Save_America1st's picture

it would be the first time Americans ever celebrated the same thing as Hamas. 

It just might finally bring peace to the Middle East.

Throw in Harry Reid and and Nasty Pelosi for a "three-fer".

Wed, 08/06/2014 - 16:15 | 5055430 813kml
813kml's picture

Please don't forget Diane Frankenstein.

Wed, 08/06/2014 - 15:36 | 5055412 JRobby
JRobby's picture

Santa is dead. Your wish is granted! Long Live Jambi!

"Mecca lecca hi, mecca hiney ho"

Wed, 08/06/2014 - 16:29 | 5055733 MASTER OF UNIVERSE

Dear Janet 'the Ponzi Munchkin', USA

Santa's Elfs' inform me that Christmas is cancelled this year due

to Santa's unfunded pension problems and labour costs of the Elf

Union Local #00001 North Pole CANADA. Please consult with your local Wizard of OZ Janet Yelen for the requests you have outlined. Moreover, the Elf rep informs me that you would have not made the 'good girl'

list this year anyways.

Best wishes in the future,


Wed, 08/06/2014 - 14:52 | 5055195 IANAE
IANAE's picture

I wonder how their capital plan and living will stacks up vs those required of banks...

Wed, 08/06/2014 - 14:54 | 5055205 lasvegaspersona
lasvegaspersona's picture


Fofoa's most recent blog piece goes over the failure of the rest of the world's failure to continue to support the dollar. It has stopped accumulating treasuries.

It is 37 page treatise...so not a 'quick read'...but if you want the juicy facts he has done some real work with this one.

It feels like homework reading it but when you are done you'll feel like you understand the basic problem facing the dollar and not just the explanations randomly tossed out by the media.

The Dirty Float   http://fofoa.blogspot.com/

Wed, 08/06/2014 - 14:56 | 5055227 Spitzer
Spitzer's picture

That fofoa post is one of the best ever. Minus the artwork

Wed, 08/06/2014 - 15:02 | 5055256 Jumbotron
Jumbotron's picture

By 2020........

Major epidemic / pandemic outbreak

War in the Middle East again with American boots on the ground.

Continued dollar isolation as world economies dislodge themselves of a relationship with the dollar.

Peak cheap energy is now recognized worldwide

Peak old farts retiring.

Peak Labor Force Participation rate.

Peak illegal aliens suppressing wages and pressuring social services both local, state and federal.

Peak Ponzi


Time to prepare Fed.   "Time to get to work Janet Yellen"

Wed, 08/06/2014 - 15:44 | 5055467 EveningInAmerica
EveningInAmerica's picture

 By 2020........


WWIII with theaters in Southeast Asia, Eastern Europe, and Middle East all provoked by CIA, armed by US MIC, with the end result being massive fatalities and destruction of industrial centers around the globe. USA is untouched throughout the war and regains supremacy as the world's factory and center of finance. Budgets are balanced and we all live happily ever after.


Wed, 08/06/2014 - 16:16 | 5055675 Jumbotron
Jumbotron's picture

I'll let people decide between our two scenarios which one of us is living in a state that now has legalized weed.  ;)

Wed, 08/06/2014 - 15:33 | 5055402 Ludwig Von
Ludwig Von's picture

But that beast, alltoghether must be 50% of GDP ?

Wed, 08/06/2014 - 15:57 | 5055563 debtor of last ...
debtor of last resort's picture

That's because an overdose causes death, headbanger. Time for a new, moar sophisticated, DRUG.

Wed, 08/06/2014 - 16:15 | 5055670 teslaberry
teslaberry's picture

the federal reserve is not fucked until a u.s. military coup occurs. 


until then, they are simply figuring out how to extract more purchasing power from the u.s. public. 


i don't think you really understand how much power they have. they threatened congress to shut down the entire u.s. economy in 2008 if they didn't get there way. 


of course, they were lying and bluffing about their power to do that ( if it happened it would happen regardless of their 'desire') but what they were not bluffing about was their ability to stop funding and prevent major corporations from funding any politicians campaigns who opposed them. 


the banks have leverage over the major nexus of corporations that are responsible for the lion's share of 'money in politics'. and this includes the major private universities of the united states. 


harvard  , columbia, nyu, princeton, etc.....i mean for fuck sake, former dhs is the head of the california public univestity system. so the banks have leverage over the corporate and higher educational sector, and also work fairly tightly with the oil barrons. 


if it is anyone that can push against the u.s. banks it is potential officers in the u.s. military, and the oil oligarchs who possible have enough power to challenge the banks, but have no reason for doing so and mostly every reason to cooperate with them. 


when everything goes to total shit, you have 3 major banks--goldman jpmorgan and banc of zamerika that control the fed. 

those 3 banks as a conglomerate are willing to eat their own (lehman) to survive. and would do it again and again. as long as the public takes the short end of the stick. 


the only leverage the u.s. public has is popular support for a military coup by a conspiracy of officers loyal to the american people's crusade against bankers. 


that's NOT going to happen. so the fed isn't worried. they are just maneuvering as usual.....

Wed, 08/06/2014 - 18:22 | 5056249 Everybodys All ...
Everybodys All American's picture

That's largely a lot of nonsense when the world simply says we don't want your paper or debt anymore. There is literally nothing that can be done outside of continued printing and monetizing. Why do you think gold is ripping higher today? Do you get it? The rest of the world is signaling that they are not buying treasuries at the level the US needs to run the government with the current deficit spending. The end is near and no one wants to admit the reality of higher interest rates to sell this debt to anyone and everyone. Game over.

Wed, 08/06/2014 - 20:44 | 5056769 Calmyourself
Calmyourself's picture

550 Majors cashiered, one thousand captains before that, the rest of the upper echelon is political, coup, your dreamin'

Wed, 08/06/2014 - 19:39 | 5056577 Buck Johnson
Buck Johnson's picture

Yep, and it's going to hurt us big time.  When we lose that status, inflation will hit the roof if not hyperinflation. 

Wed, 08/06/2014 - 14:36 | 5055110 Kirk2NCC1701
Kirk2NCC1701's picture


Wed, 08/06/2014 - 14:39 | 5055128 mayhem_korner
mayhem_korner's picture



Beat me to it, Kirk.

Bel="capital", gium="markets"

Wed, 08/06/2014 - 14:53 | 5055200 Sudden Debt
Sudden Debt's picture

We also sell beer...

Wed, 08/06/2014 - 15:03 | 5055260 disabledvet
disabledvet's picture


Wed, 08/06/2014 - 15:18 | 5055317 knukles
knukles's picture

And they gots French Fires, too!


       sorry SD but I couldn't resist

Wed, 08/06/2014 - 15:31 | 5055387 Ludwig Von
Ludwig Von's picture

And Westmalle, Rochefort, Orval and Westvleteren. That is all the real, all others are fiat ! :-)

Wed, 08/06/2014 - 15:33 | 5055395 dontgoforit
dontgoforit's picture

Duvel!  "Devil" beer - 8% alcohol content. 

Wed, 08/06/2014 - 15:38 | 5055422 Ludwig Von
Ludwig Von's picture

10 weight percentage. For export, they now have a lighter version, our main secret weapon must not be unveiled... . :-)

Wed, 08/06/2014 - 15:45 | 5055468 dontgoforit
dontgoforit's picture

I (halfway) remember a night in Ghent, or was it Bruge, or both?  Strong stuff, that Duvel.

Wed, 08/06/2014 - 16:38 | 5055778 BlindMonkey
BlindMonkey's picture

If it wasn't for that celebacy thing I would be all in on becoming a Trappist monk.

Wed, 08/06/2014 - 16:42 | 5055798 messymerry
messymerry's picture





Wed, 08/06/2014 - 14:40 | 5055126 craus
craus's picture

They need access to the markets to continue the facade.

Wed, 08/06/2014 - 14:41 | 5055141 Jack Sheet
Jack Sheet's picture

For fuck's sake, the Chairmanwoman presses control-P and credits the treasury's account with 10^12,FRNs, problem solved.

Wed, 08/06/2014 - 14:43 | 5055149 fonzannoon
fonzannoon's picture

I'm with you. Just hit some buttons and we are all set.

Wed, 08/06/2014 - 14:48 | 5055174 Its_the_economy...
Its_the_economy_stupid's picture

The problem is that looks too much like just printing money. The auction charade is needed to keep the people sedated.

Wed, 08/06/2014 - 14:45 | 5055159 mayhem_korner
mayhem_korner's picture



That's only a $Trillion (or one of Ben's platinum coins).  Won't even scratch the surface.

Wed, 08/06/2014 - 14:43 | 5055145 Bill of Rights
Bill of Rights's picture

U.S. Civil Rights Commissioner: College kids not ‘developed’ enough for free speech

I suggest you all read this. If this were a Republican saying this the Social Media sites would be melting, where is the outrage?


Wed, 08/06/2014 - 14:54 | 5055203 Bollixed
Bollixed's picture

George Washington was out and about surveying the western parts of Virginia when he was 13 years old.

Just how dumbed down are our children now? Apparently not enough to satisfy the uber-nannies.

Wed, 08/06/2014 - 16:41 | 5055793 BlindMonkey
BlindMonkey's picture

They are throwing felony child abuse charges on a mom for sending a kid unsupervised to a park FFS.  

Wed, 08/06/2014 - 15:39 | 5055436 JRobby
JRobby's picture

He clearly misspoke.

Had he been reading his Trilateral Commission findings each evening as assigned by his overlords, he would see that everything is going according to plan.

What an ass.

Wed, 08/06/2014 - 14:43 | 5055147 madbraz
madbraz's picture

Read through the BS, this is only smokescreen to issue more treasury at auctions and hand them to the primary dealers via reverse repos so that they can continue to short treasuries.  Just like this talk about issuing 50 year paper - why oh why are they bringing this up, other than to put pressure on yields and benefit dealers - the only thing the treasury and the FED are concerned with.


Take away reverse repos and yields collapse.


And by the way, note that the upcoming auction are for amounts greater than the average auction amounts (30yr auction will be $16 billion, as opposed to normal $13 billion).  This is all to satisfy the dealer bets, as the bid to cover is obviously weaker.

Wed, 08/06/2014 - 15:40 | 5055442 JRobby
JRobby's picture


It was the middle part

Wed, 08/06/2014 - 14:42 | 5055148 mayhem_korner
mayhem_korner's picture



Where I used to work, the policy was cash reserves equal to 100 days of operations. 

99% of the U.S. is living paycheck to paycheck (SNAP to SNAP); the U.S. gubmint is living ponzi auction to ponzi auction

Wed, 08/06/2014 - 15:34 | 5055404 dontgoforit
dontgoforit's picture

There's a great day a'comin'.

Wed, 08/06/2014 - 19:55 | 5056626 Amish Hacker
Amish Hacker's picture

SNAP to SNAP is the scary one. Apparently, if you go into any Walmart just before midnight on the day the cards get reloaded, the place is packed with people food shopping. What happens if, for any reason, those SNAP cards don't work?

Wed, 08/06/2014 - 14:43 | 5055150 Doubleguns
Doubleguns's picture

Couldn't they just borrow from Greece or Italy or possibly Venezuela or Peru. Lots of options it would appear. /s 

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