The Supercommittee That Really Runs America - Presenting The November 1 TBAC Minutes

Tyler Durden's picture

With Tim Geithner having proven repeatedly and beyond a reasonable doubt he has insurmountable intellectual challenges, many have wondered just who it is that makes the real decisions at the US Treasury? The answer is, The Treasury Borrowing Advisory Committee, or the TBAC in short, chaired by JP Morgan and Goldman Sachs, which meets every quarter, and in which the richest people in America (here is its composition) set the fate of the US for the next 3 months in the form of a very much irrelevant report to TurboTax (link). What is of huge importance, however, are the minutes, which unlike the FOMC, are released immediately following the meeting. Below are the full minutes from the latest TBAC meeting held yesterday, just released by the US Treasury (and yes, the issuance of FRN Treasurys, corporate cash hoarding as well as the resumption of the SFP program are both discussed - like we said: these guys run the world) as well as the critical associated powerpoint.

Minutes of the Meeting of the Treasury Borrowing Advisory Committee the Securities Industry and Financial Markets Association November 1, 2011

The Committee convened in closed session at the Hay Adams Hotel at 9:30 a.m.  All Committee members were present with the exception of Paul Tudor Jones.  Assistant Secretary for Financial Markets Mary Miller, Deputy Assistant Secretary (DAS) for Federal Finance Matthew Rutherford and Director of the Office of Debt Management Colin Kim welcomed the Committee and its newest member, Stuart Spodek [fixed income PM at BlackRock].  Other members of Treasury staff present were Fred Pietrangeli, Jennifer Imler, Amar Reganti, Allen Zhang, David Chung, Alfred Johnson, Dara Seaman and Brian Zakutansky.  Federal Reserve Bank of New York members Dina Marchioni and Mark Cabana were also present.

DAS Rutherford began the meeting with an update on tax receipts, which were $140 billion higher in 2011 versus the prior fiscal year (FY).  He noted that withheld receipts were up only slightly on a year-over-year basis due in part to the payroll tax cut.  Corporate tax growth slowed in Q4 FY 2011.

DAS Rutherford then discussed outlays, which totaled approximately $3.6 trillion in FY 2011 or roughly 24 percent of GDP. Health and Human Services was the largest outlay in FY 2011 at $891 billion, with Medicare and Medicaid being the largest sub-categories. Social Security spending totaled $784 billion, with Old-Age, Survivors and Disability Insurance increasing the most. The third largest outlay was Defense, within it, Operations and Maintenance was the largest expenditure. Rounding out the top four categories was Treasury.  Roughly 85 percent of the $537 billion in Treasury outlays was made up of interest expense, with $235 billion from debt service on marketable debt and about $220 billion from non-marketable interest payments. With respect to nonmarketable borrowing, DAS Rutherford noted that SLGS redemptions continued into Q4 FY 2011, causing Treasury to borrow an extra $17.6 billion last quarter.
Next, DAS Rutherford reviewed the deficit for this past fiscal year versus the prior two years.  For FY 2011, the deficit was recorded at 1.299 trillion, or 8.7 percent of GDP.  Going forward, dealers expect the deficit in FY 2012 to total $1.132 trillion, consistent with expectations last quarter. Most estimates assume the deficit will fall to below $1 trillion by FY 2013.

DAS Rutherford briefly summarized the American Jobs Act (AJA) into three components: extension of current laws, spending measures and new/incremental tax cuts.  He noted that the President’s plan was meant to stimulate to the economy in the short term, while putting in place a medium-to-long-term credible deficit reduction plan.

Director Kim then discussed Treasury’s debt portfolio.  Given current OMB deficit projections, which include the AJA, and assuming no changes to issuance sizes or auction frequency, Treasury expects to be modestly under-financed in FY 2012. However, given the same assumptions, Treasury would be over-financed from FY 2013 through FY 2016.

Kim next reviewed a number of debt metrics.  The average maturity of the portfolio, which currently stands slightly above 62 months, continues to extend.  Kim proceeded to discuss hypothetical average maturity calculations.  In the example used by Director Kim, Treasury adjusted future nominal coupon issuance on a pro-rata basis, while keeping the mix of securities and the auction schedule constant.  Treasury also held the bill stock constant.  In this example, the maturity was shown to naturally extend to approximately 70 months by 2015.

Kim emphasized that the average maturity projections and the associated underlying assumptions for future issuance were purely hypothetical.  The projections were not meant to convey future debt management policy or an average maturity target.  He reiterated that Treasury must remain flexible in the conduct of debt management policy.

Currently, Treasury bills make up about 15 percent of the debt portfolio, with nominal coupons and TIPS at slightly more than 77 and 7 percent, respectively. If Treasury were to adjust nominal coupons to meet OMB’s future financing estimates, bills would become approximately 10 percent of the debt portfolio around 2016.  Additionally, on a percentage basis, the amount of Treasury debt maturing in the next 1, 2 and 3 years remains at historic lows.  If Treasury were to continue its current issuance pattern, Kim noted that by FY 2020 almost 20 percent of the portfolio would have a maturity profile greater than or equal to 10 years.

Director Kim then discussed demand for Treasuries.  He commented that auction coverage ratios remain very high for all of Treasury’s products.  Treasury bill bid-to-cover ratios have averaged 4.61 for this FY and coupon bid-to-cover ratios averaged 2.98.  Kim also noted that Treasury’s investor class data, which is released twice a month, continues to show healthy participation from a variety of accounts.  Kim highlighted that investment funds are becoming a larger participant in TIPS. Observing the change in investor class auction purchases in FY 2011, as compared to past years, he noted that there was an auction rule change in June 2009.  The new rule prevented primary dealers from guaranteeing an auction award at the clearing level to their customers.  Once this new rule went into effect, primary dealer awards declined.

Kim mentioned that private and public foreign participation was slightly less in FY 2011 than in FY 2010, with the largest decline in the bill sector.  Also, data shows an uptrend in longer-dated nominal coupon awards to foreign accounts.  Lastly, Kim noted that primary dealer awards averaged 59 percent for bills, 49.4 percent for nominal coupons and 49.5 percent for TIPS.

Following DAS Rutherford and Director Kim’s presentation, the Committee turned to a brief discussion on potential changes to financing and the auction calendar.  It was the consensus that Treasury should not make any changes to issuance sizes or existing auction calendar at this time. 

The Committee noted that they have consistently advised Treasury over the last several years to extend the average maturity of the debt portfolio.  Further, members of the committee observed that maturity extension expectations should already be priced into fixed income markets. It was the Committee’s view that Treasury should continue to extend average maturity in the most cost effective way.  Members of the Committee stated that their purpose is to advise and assist Treasury in achieving its mandate of minimizing borrowing costs over time. 

A member then broached the subject of Floating Rate Notes (FRNs), noting that it was recently discussed with primary dealers ahead of the November refunding.  DAS Rutherford noted that while FRNs have many features that make them a potentially attractive instrument for Treasury, there is still a lot of work that needs to be done on the product related to cost, structure, and demand.  DAS Rutherford emphasized that no decision has been made on whether to introduce this product.  It was the view of the Committee that Treasury should continue to study the product idea with a focus on cost.  

Another member raised a question about the possible resumption of Supplemental Financing Program (SFP).  In light of debt ceiling constraints, it was the view of the Committee that Treasury should not resume the program at this time.

The Committee next turned to the charge on the TBAC agenda: “The Impact of a Prolonged Period of Low-Interest Rates on Financial Markets.”

The presenting member first turned to the state of borrowers within the U.S. economy.  The member noted that overall loan growth continues to rise as lenders are making more commercial and industrial (“C&I”) loans.  However, consumer and real estate loan growth remains weak.

The presenter noted that loan recovery was still well below prior economic recoveries.  All forms of bank credit were significantly weaker than levels seen during those other periods.  The member noted that, based on the presented data, the lack of lending was driven, in part, by a lack of credit demand rather than a lack of credit supply from traditional bank lending.

As the discussion moved into the demand segment, the presenter noted that U.S. corporations have built up significant amounts of cash, lowering their marginal demand for borrowing.  A spirited discussion followed on whether the increase in cash holdings was due to corporate concerns regarding future funding or whether corporations did not see a significant opportunity cost in holding cash.

The presenter briefly summarized the effects of the current rate environment on various fixed income investors.  The member noted that low rates are particularly challenging to the money fund industry, resulting in a difficult low return environment.  Pension funds and insurers have had difficulty sourcing enough long-duration paper at appropriate yields for their ongoing asset-liability management strategies. A variety of investors may have to either extend duration or reallocate into higher yielding products to meet certain performance targets.  Banks, particularly small banks, are facing challenges due to the compression of their net interest margins.  The impact on mortgage lenders is uncertain, with an ongoing debate on whether lower rates and a flatter curve will spark more origination or “refi burnout”.  The presenter noted that REITS will likely suffer due to a lower carry and higher pre-payments.  In addition, mortgage servicers will see their mortgage servicing rights impacted during periods of refinancing or prepays.  The presenter also noted that foreign investor demand for Treasuries still remains healthy by historical standards.

Finally, the presenter concluded that Treasury should continue to investigate new product alternatives in order to diversify its investor base.

The meeting adjourned at 12:00 p.m.

The Committee reconvened at the Department of the Treasury at 5:40 p.m.  All Committee members were present with the exception of Paul Tudor Jones. The Chairman presented the Committee report to Secretary Geithner.

A brief discussion followed the Chairman's presentation but did not raise significant questions regarding the report's content.

The Committee then reviewed the financing for the remainder of the July through September quarter (see attached).

The meeting adjourned at 6:15 p.m.


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Henry Chinaski's picture

We are pawned pawns pwnd.

HoofHearted's picture

And we are pwned by a TBAG TBAC committee...make it even worse

TruthInSunshine's picture

A member then broached the subject of Floating Rate Notes (FRNs), noting that it was recently discussed with primary dealers ahead of the November refunding.  DAS Rutherford noted that while FRNs have many features that make them a potentially attractive instrument for Treasury, there is still a lot of work that needs to be done on the product related to cost, structure, and demand.  DAS Rutherford emphasized that no decision has been made on whether to introduce this product.  It was the view of the Committee that Treasury should continue to study the product idea with a focus on cost.  


And on the subject of that FRN acronym, which also stands for Federal Reserve Notes, being symbolic of all inherently worthless fiat everywhere, upon which the greatest global ponzi in history is based, these people are not the ones who rule the world.

These people who meet so openly are mere errand boys/girls.

The ones who rule the world are behind the curtain, rarely seeing the light of day.

But they have a simple Modus Operandi, that has served them well for centuries.

1)  Create fiat using nothing more than an computer/ledger entry, backed by nothing of inherent value, that has legal recognition.

2)  Circulate such fiat via loaning it out, charging interest upon it.

3) Successfully get nations, business entities and individuals to borrow said worthless fiat that was conjured from thin air, and pay interest, pledging their real, inherently valuable assets in exchange for said worthless fiat (i.e. meaning that their real, inherently valuable assets can be taken if the conditions that make it impossible for them to repay the worthless fiat are [intentionally] induced).

4) Set the rate of interest payable on the loans of fiat that was conjured from thin air, solely at their discretion.

5) Supply more of such fiat, or withdraw fiat, to/from the system, at their discretion, bringing about inflation or deflation.

6) During times of large scale loan defaults, on the repayment of the fiat that they conjured from thin air, backed by nothing of inherent value, seize the most valuable assets that exist on the planet, many of which mankind depends on for its very survival.

topcallingtroll's picture

Yeah he makes it sound so appealing.

Is turbo tax Timmah really part of this strategem?

Couldnt they have picked a better guy to run the treasury?

BigJim's picture

Thank God our leaders would never let it happen!

The Big Ching-aso's picture

I must say a very diverse group on this committee.   Affirmative action at work no doubt too. 

It's good to know that these stellar stewards of our financial system meet regularly to fuck things up consistently so we can plan accordingly.    The market hates uncertainty ya know.

Bring the Gold's picture

Excellent post. This is exactly what they do. Everyone who isn't completely compromised should take some time to reflect on financial history since 1870 onward (you can begin earlier in Europe especially England and Venice) in the US. You can also look at the history of the first two banks of the United States. You can see how engineered panics (1907 etc.) brought about the current FED system to operate in just the manner described. This system was perfected in Europe and imported to the US. Several of the Founding Fathers and early presidents (Andrew Jackson for all his other crimes and failings was on the right side of this issue) worked tirelessly against just such a system being implemented in this country.

SRV - ES339's picture

Well done TIN... clearly you get it!

Sent CNBS Asshat Hobbs a note to stop referring to the Greek protesters as anarchists yesterday... they're standing up to these monsters and I hope they force a default and blow the whole thing up!

It's time folks... no excuses if you try to squeeze a few last drops from the system before it goes down and you lose it all... ask anyone tied to MFG (how many traders saw the danger when they scooped up Lind-Waldock)!

eureka's picture

Okay - cool - agreed - so let's liste THESE REAL RULERS OF THE WORLD:

Rothschilds, Rockefellers, Koch Brothers, Bill Gates, Warren Buffet... anyone else - let's complete the list and then encourage EVERYONE on earth to completelt boycott any and all of their products and corporation.

What Do we really know? We should know who the real scumbag are - c'mon TRUTH IN SUNSHINE - name and list them all, please.

wang's picture

but who pays for travel, lodging and meal expenses and do they fly coach?

TruthInSunshine's picture

They could stay at the Red Roof Inn, since the U.S. Government bought that delapidated chain of slumtels with U.S. taxpayer money via the TARP/TALF scam, but I heard a rumor that they prefer 5 star hotels with Michelin Star restaurants.


AE911Truth's picture

Hey, what about using interest free Treasury issued money?

We could print enough to pay off the debt, eliminating all interest expense. This would save billions.

We wouldn't even need an IRS. Why collect tax when you can just print what you need? Doing away with the IRS would save billions.

Of course you would want to preserve your wealth in precious metals.

Any questions?

TruthInSunshine's picture

That would greatly upset the inner sanctum loan shark racketeering group (ISLSR), and would lead to a global war.

They like their fractiona reserve fiat alchemy that they've monopolized which brings them unlimited interest payments in exchange for perpetually driving nations, business enterprises and individuals deeper into debt servitude, and getting the best assets having real value that these nations, business enterprises and individuals previously owned when they ultimately default - and make no mistake about it, they will all default ultimately.

Tulips, dot.coms, real estate, house flipping, VISA/MasterCard, HELOCs, social networking IPOs - it doesn't matter the drug that gets the junkies addicted and indebted; the end result is always the same.

AE911Truth's picture

Dear Truth;

Your answer highlights why we need to stop using their debt based money. Perhaps we need a popular movement to create this change. Thanks

Quinvarius's picture

Yeah.  The last thing they want is a debt free public.  Imagine the velocity of money if people had no debt. 

TruthInSunshine's picture

While there's no doubt that the velocity of money would slow absent a debt-reliant system, a cash and carry economy would certainly lead to far more prudent financial decisions, far fewer boom-bust cycles, and consequently, far fewer opportunities for TPTB (those who conjure fiat from thin air at zero cost and loan it out charging interest, while receiving pledges of collateral having inherent value to secure such fiat loans) to 'relieve people of their most valuable possessions' (many of which have been held by their families for a generation or more, as in the case of family businesses/farms/jewels/PMs - Niederhoffer's prized silver antique collection comes to mind, but he was fully in bed with the sharks).

In other words, a far less debt reliant system, based on worthless fiat loans & fractional reserve banking, would lead to far more sustainable, real, organic economic growth, with far fewer 'harvests of dispossession.'

pepperspray's picture

Iran already read this

metastar's picture

Terrorist have long ago invaded Washington & Wall Street dwarfing any threat posed by Iran.

GeneMarchbanks's picture

Mark Cabana = Mark Cuban?

There seem to be a lot of fake people at these meetings, as in made -up characters. Never heard of ninety percent of those lunatics....

i-dog's picture

The Squid's 'vice chairman' of the meeting is just 1 of their approx. 1,000 "managing directors" ... not even board or partner level. It's a side-show.

grunk's picture

Did they plan the office Christmas party?

Tsar Pointless's picture

I'm sorry. I read the whole thing, but all I got out of it was:


mkkby's picture

All I got out of it was... laughter.  If it had any meaning it wouldn't be displayed publicly.  These clowns are just the distraction.

Cursive's picture

Tim Geithner = sock puppet

bankonzhongguo's picture

Adding "puppet" gives an air of humanity.

Really just a sock.

marcusfenix's picture

"Director of the Office of Debt Management"

I'm guessing that's more of a ceremonial position, obviously bereft any any real meaning or function, kind of like the king of England or TOTUS...

traderjoe's picture

It's ALL about keeping up appearances.

CrimsonAvenger's picture

I have to note that Tyler continues to display a wicked sense of humor - I hope it gets him some action with the ladies. If I was that clever I'd be getting laid all the time.

My wife, of course, would be furious.

hedgeless_horseman's picture



Allow me to summarize.

Our banks' net interest margins are in the toilet.  How do we help?

narnia's picture

most of them would gladly accept the spread between past fixed rate obligations on depreciating collateral and ZIR with no loan growth than compressed spreads on rapidly depreciating collateral on rising IR with uncertain loan growth.

Zgangsta's picture

So that's why the Dow is soaring today!

e2thex's picture

The last time we met the wine list was rather shabby.

merchantratereview's picture

Zero hedge is the NY Times and Wall St Journal combined. Great reporting!

jayman21's picture

What kind of ZH'er would junk this?  Did someone piss on your cheerios this morning?

HellFish's picture

Probably due to the insulting comparison of ZH to the NYT.

11b40's picture

"Finally, the presenter concluded that Treasury should continue to investigate new product alternatives in order to diversify its investor base."

The junkers are probably from the GS marketing department....the same mentality that thinks the TSY needs to seek new "products" to divesify it's investor base.

Wasn't it all the new "products" conjured up on Wall St. that got us into this mess? 

In this instance, I would call any new "products" they came up with junk....and instead of "investor base", the proper term would be "suckers" if outsiders, or "scammers" if insiders, depending on how the "product" was structured and who it was marketed to.

zhandax's picture

No, it was that nightmare conjured on Jekyll Island and blamed on the panic of 1907 that got us into this mess.

Life of Illusion's picture



First thing they talked about.

All they care about is keeping that debt in tacked and re-inflated.

At any cost!


Sudden Debt's picture






bernorange's picture

"The presenter also noted that foreign investor demand for Treasuries still remains healthy by historical standards."


unununium's picture

The presenter noted ... A member broached ...

Not surprising that nobody wants their name associated with treason.

Use of Weapons's picture

You're missing the snark: Liberty Bonds?



Raging Debate's picture

Ahh the irony and ohhh the horror... Man has evolved past 3d models long ago. Attempting to force a 3d triangular peg of 6667 into a 4d box of 4444 will no longer work.

Someone please tell them this time is different. However, it appears thier are mathematical and computational tools to create the solutions. Anything else now just destroys confidence. Use post-modern physics not neoclassic inputs from Malthus day. The current priests are basically telling us to become sun-worshipers. It is insulting to 6b Interweb users but the 6b don't know why. Perhaps this is food for thought...

Use of Weapons's picture

Sirius, Sirius, my dear fellow.

Where once there were 230 possible phases, we have now gone to a 5 fold Fourier, and so we are opened up. Whilst meeting replicas is both pleasing and confusing, one has to remember compassion and deal with our problem of Quenched Disorder. To deal with a QD issue on the interweb, one has to embrace and consume the flesh of the m[i/e]metic load - holding 4 schema layers of virulently conflicting belief & alief at a time, whilst maintaining both a status quo performance and humanity, leads to bleed and a noise ratio unpalatable to (the) many. We understand the distraction and pain that can bring to harmony, but all antibodies require infection of the host to start with.

To cease pollution, sometimes poisons have to be administered both to the body, and the body politic, to allow moments of silence. Torture was required to provide an opening, and From Metaphor to Metamorphosis requires one to understand that the unconscious realm summons that worst of all - À la recherche du temps perdu. 


Song of the Sea, a Capella, and Unanswered


Shock reveal: this is my base