Tuesday, May 12, 2015

Fed Has Emergency Plan to Intervene if U.S. Defaults on Debt

The Federal Reserve has extensive plans for handling a U.S. debt default that include scheduling deferred payments and lending cash to investors, according to Congressman Jeb Hensarling (R-TX)  who cited Fed documents, reports Reuters.

In a June 2014 letter to Treasury Secretary Jack Lew seen by Reuters on Monday, Hensarling said his staff had reviewed the Fed's unclassified plans for how to handle a default.

The plans included scheduling new payment dates for defaulted securities, Hensarling said in the letter which was also signed by Congressman  Patrick McHenry (R-NC).

In the letter, according to Reuters,Hensarling said the documents also showed that the Treasury had the ability to pick which obligations it can pay, which would allow it to favor bond investors over its many other obligations.

The full text of the letter is here.



  1. An ephemeral FDIC is about to wink out, as the economic engine is about to throw a rod due to declining household spending, poor retail sales, and sand in the bond market bearings which can no longer be ignored. Grab your cash, or cash equivalent as the economy is screaming to you that the acceleration of events is overtaking the plans of those who staunched reality with economic propaganda worthy of Kim Jung Un.

  2. The fact that they mention to me is very telling....

  3. The default happened when Nixon closed the gold window in 1971. It's been a confidence game ever since. I'm just amazed they've been able to keep this thing going for so long.

    The correction is going to be one for the ages.

  4. Basically it means that the middle class taxpayer will have to subsidize the wealthy once again.