How does the US Treasury payment system work – can they simply reprioritise payments if the debt ceiling is not raised?

Author: Eamonn Sheridan | Category: News

Here’s a long piece from FTAlphaville. It may require (free) registration to read.

It looks at the question of whether, in the event of the debt ceiling not being raised, prioritising interest and principal payments on Treasuries is possible in order to avoid default.

  • The US Treasury department has emphasised the logistical complexity as much as the legal and political dubiousness of prioritizing payments

the government’s payment system “is sprawling. It involves multiple agencies. It involves multiple interacting computer systems. And all of them are designed for only one thing: To pay all bills on time. The technological challenge of trying to adapt that to some other system would be very daunting and I suspect that if we were forced into a mode like that the results would be riddled with all kinds of errors.”

  • Treasury makes more than 80 million payments per month
  • Its systems are designed to make each payment in the order it comes due
  • Its not clear how well discontinuing some payments while making others would work in practice, if at all

Raise your hand if you know how the Treasury’s payment systems work… Anyone?

By continuing to browse our site you agree to our use of cookies, revised Privacy Notice and Terms of Service. More information about cookiesClose