Is there any ceiling on the U.S. Federal Debt?
*The Wall Street Journal, by Min Zeng, October 6, 2008
“Now comes the hard part: raising the money to pay for the U.S. government’s rescue plan.
Right now, there is good demand for low-risk U.S. Treasurys as investors around the world flee risky assets. The weakening economy adds to the allure of safe government debt.
But while those factors could help damp the rise in market rates that will come with the flood of fresh supply, long-term rates are still likely to rise, which could hurt the already struggling economy.
Even before the latest escalation in the credit crunch, the Treasury was considering ways to raise more money to fund the rising federal deficit. September’s bailouts of Fannie Mae and Freddie Mac, the loan to insurance giant American International Group Inc. and the backstops for money-market funds all added to the government’s cash needs.
Now comes the up to $700 billion Troubled Asset Relief Program to deal with toxic assets held by the banking system. As part of that package, lawmakers approved an increase in the federal debt ceiling to $11.3 trillion from $10.6 trillion.”
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