Jul 28 2011
Financial Oversight Council Fails to Sufficiently Meet Utah Senator’s Deadline
WASHINGTON – U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, today blasted the Obama Administration and the executive branch agency, the Financial Stability Oversight Council (FSCO), for failing to sufficiently meet a deadline to provide lawmakers and the American people with information about the resources available to avoid default and detailed contingency plan if the debt ceiling is not raised by August 2.
“We are debating debt and deficit plans that involve trillions of dollars, yet we only have guesses about how much cash the federal government expects to have in August from a non-government think tank and from Wall Street firms. This is unacceptable,” said Hatch in a speech on the Senate floor today. “The American people deserve transparency and accountability. The Administration and the regulatory branch of government choose, instead, to withhold information from the people and their elected representatives in Congress.”
Yesterday, Hatch wrote to eight members of the FSCO, the group charged with monitoring the financial stability of the nation, asking for detailed information about how much money the Treasury Department has by 5:00 PM today.
To date, Hatch has received just two responses from the members of the FSOC regarding his request -- one from the Office of the Comptroller of the currency and one from the National Credit Union Administration. Unfortunately, these responses failed to address the Treasury’s cash position, whether August 2nd is still perceived to be the most likely date when Treasury will run out of cash to pay incoming bills, and offered generalities about their own contingency plans and no information about a general government contingency plan. Hatch has yet to hear from Treasury Secretary Geithner or Federal Reserve Chairman Bernanke.
During his speech, Hatch vowed to investigate the lack of transparency and accountability for the nation’s short-term financial position as the debt limit impasse moves toward August 2 nd, the date that Treasury gave as the deadline when cash runs dry.
“The refusal by members of the FSOC, including the Treasury Secretary, to provide simple, basic information about government finances is unacceptable and requires investigation and action,” Hatch continued.
Voting members of the Council are: Treasury Secretary Geithner; Federal Reserve Chairman Ben Bernanke; Commodity Futures Trading Commission Chairman Gary Gensler; U.S. Securities and Exchange Commission Chairman Mary Schapiro; Federal Deposit Insurance Corporation Acting Chairperson Martin J. Gruenberg; Federal Housing Finance Agency Acting Director Edward DeMarco; National Credit Union Administration Chairman Debbie Matz; and Office of the Comptroller of the Currency Acting Comptroller John Walsh.
Below is the text of Hatch’s remarks delivered on the Senate floor this afternoon:
Turning to the matter that is consuming the nation, I would like to address the so-called August 2 deadline that we hit next week.
In early April of this year, Treasury Secretary Geithner informed Congress that Treasury might run out of ways to stay at the debt limit and have enough cash to pay bills by around July 8. About a month and a half later, on May 16, the Treasury Secretary updated his guess to August 2.
This August 2 deadline, which the Administration has insisted is the date when Treasury runs out of sufficient cash to pay bills, was estimated back in the middle of May. It is only reasonable to expect that Congress would be kept appraised of Treasury’s cash flow status and estimates. If we indeed face an economic catastrophe on August 2, it is only reasonable to expect warnings from those in government responsible for issuing such updates and monitoring threats to our financial stability.
We have a group in government that is charged with that responsibility. It’s called the Financial Stability Oversight Council, or FSOC (PRONOUNCED F-SOCK), set up in the Dodd-Frank financial regulation law. The FSOC is chaired by the Treasury Secretary and composed of members like the Federal Reserve chairman and banking regulation czars. Indeed, the FSOC was sold by Democrats as a body that would be able to spot threats to our financial system and then warn and protect us all.
The President, Treasury officials, the President’s press secretary and others in the Administration daily warn of catastrophe, crisis, and the potential for conditions even worse than we saw during the financial crisis. They seem to be channeling Dr. Peter Venkman who faced with another catastrophe once predicted a disaster of Biblical proportions . . . . human sacrifice, dogs and cats living together, mass hysteria.
Yet through all these predictions, the FSOC has essentially remained silent. That body of unelected bureaucrats either doesn’t see an impending threat to stability from the debt limit impasse or from a ratings downgrade for the United States, or it is just too busy writing a mountain of new regulations to make a warning.
Mr. President, I sent a letter, which I’d like to have placed in the record, to eight voting members of the FSOC yesterday, asking two basic sets of questions.
One is whether they see any imminent threat to financial stability from the debt limit impasse or from an impending downgrade to our nation’s credit rating. Of course, we face warnings of downgrades to our nation’s credit rating not merely because of a debt limit impasse.
We’ve had dozens of such impasses in recent decades, with no effect on our credit rating. Yet, we DO face warnings of a ratings downgrade because of President Obama’s acceleration of deficits and debt along our unsustainable fiscal path and unsustainable entitlement promises.
With spending as a share of the economy up to levels not seen since World War II and a lack of willingness by the Administration to break its deficit-spending addiction, ratings agencies have been brought to the edge and warn of impending downgrades. Those downgrades would immediately harm job creation, the economy, the cost of credit for every American family and business, and — indeed — overall financial stability.
However, instead of a forthright discussion of this threat, the FSOC chose instead to bury an academic discussion of it in their annual report.
Let me remind everyone how important Democrats said the FSOC would be as an early warning system, protecting us from imminent threats to stability.
It would be a watchdog.
A cop on the beat combing global financial markets for imbalances and stability threats and then warning everyone.
The President, the Treasury Secretary, ratings agencies, the Secretary of State, Fed Chairman Bernanke, Admirals, investors, former administration officials from across party lines —all have issued warnings of threats to financial stability from our fiscal crisis.
Yet the FSOC buried whatever observations it has about our crisis in its annual report.
Another set of questions I asked the FSOC involves Treasury’s cash flows through August and the date at which Treasury now believes it is most likely to run short of cash. I asked about contingency plans that Treasury, the Fed, and bank regulators have if there is a ratings downgrade. Reports of meetings of Treasury Secretary Geithner, Fed Chairman Bernanke, and New York Fed President Dudley suggest that contingency plans certainly are in the works.
Yet as the Ranking Member of the Senate Finance Committee, the Administration has provided me with no information on what those plans might be in spite of my responsibility for oversight of debt and cash operations at Treasury. I wish that I could say I was surprised. But the fact is, the promise of the most open, deliberative and rational Administration in history has given way to a highly secretive and partisan operation that denies the people of this country the leadership they are owed.
Perhaps I am supposed to wait, as in the past, for news reports on Sunday afternoon before the opening of financial markets in Asia to find out what we would do if an economic catastrophe in fact unfolds.
Mr. President, it is an unsatisfactory and unacceptable state of affairs that the American people and members of Congress do not have updated and sufficient information about Treasury’s cash flows and liquid assets, or the contingency plans of our financial regulators. It is disturbing to me that in recent days members of Congress in both chambers have gone to their respective floors to discuss Treasury’s cash and liquidity position using information supplied either by large Wall Street financial institutions or by a non-government think tank.
Press reports of the U.S. Treasury’s financial condition have also been relying on those sources.
Why do members of Congress not know details of Treasury’s projected cash flows for August? Why are we relying on dated numbers Treasury gave us months ago? How can we decide whether August 2, a threshold date estimated by Treasury back in May, is even close to some sort of deadline date for dealing with the debt limit?
Maybe the date is July 29. I don’t know and neither the administration nor the FSOC has told us.
Maybe the date is August 15. I don’t know and neither the administration nor the FSOC has told us.
I don’t know. The American people don’t know.
And this is unacceptable.
Wall Street firms have recently put out their own projections and say that August 2 may not be relevant at all. Maybe it will be August 8 when Treasury runs into a cash flow problem. Maybe it will be August 13. Does Treasury still believe August 2 is a date when cash flow problems are most likely to arrive, given new information on government receipts since early May? If not, we need to know, and we need to know how that assessment has been made. If so, then why is Treasury not telling us and showing us why?
My letter to FSOC members, which includes the Treasury Secretary, includes a simple request for updated information about Treasury cash flows and liquid assets. Given warnings from the Administration that there is special urgency to act on the debt limit by August 2, time is of the essence and, so, I asked to receive responses from FSOC members by 5:00 today.
Mr. President, I have received no reply about Treasury cash flows and liquid assets.
Television cameras can’t be turned on in this town without capturing some Administration official reminding Americans about the looming default, but they are unable to provide Congress with the numbers that would show when that default will happen.
Let me say this again.
I asked for and have not received critical information about the state of our Nation’s short-term finances that I specifically requested from eight voting members of the FSOC, including the Secretary of the Treasury.
I have received no response at all regarding the cash and liquid assets Treasury has and expects to have available.
But worse than the refusal by the Treasury Secretary and other FSOC members to inform us about our Nation’s cash position is their refusal to keep the American people duly informed about the state of our finances. It is, quite simply, a shirking of their responsibility to the citizens of this country. Rather than providing transparency, the Administration has chosen to scare Social Security recipients about their benefits in politicized debt-limit negotiations.
We are debating debt and deficit plans that involve trillions of dollars, yet we only have guesses about how much cash the federal government expects to have in August from a non-government think tank and from Wall Street firms. This is unacceptable.
Mr. President, one of the most troubling aspects of this lack of disclosure is the way that it is affecting our Nation’s seniors. I listen to my constituents in Utah, and many of them who rely on Social Security are very worried and scared. The Obama Administration has been hard at work frightening them about the prospects of default. More concerned about his election prospects than resolving this crisis, President Obama commented recently that he could not guarantee that Treasury would be able to make Social Security payments in early August.
This fear mongering is shameful.
For the President to threaten not to send out Social Security checks is a stain on his presidency. Those relying on Social Security benefits rightfully count on timely payments. They worked hard and paid taxes and timely benefit payments are due to them. Those payments can and should be assured. No question.
Why is he using the politics of fear on our seniors?
Given the information that is available, it appears that roughly $50 billion of Social Security payments are due during August Recent estimates from outside sources put flows into Treasury at between $170 billion and over $200 billion in August from various tax receipts and other sources. That alone is more than enough to pay $50 billion in Social Security payments, with cash left over for the $30 billion due on our debt in August and more.
Perhaps the President is worried about the timing of cash flows in August. Yet even if all $50 billion of Social Security payments came due on August 3 — and they won’t — Treasury can easily get its hands on cash to pay those benefits. According to the Daily Treasury Statement for July 26, Treasury has $5 billion sitting idle at the Federal Reserve. Treasury can call up the Fed right now and get that $5 billion in cash. Treasury has roughly $90 billion in mortgage-backed securities that it bought in the financial crisis to bail out housing markets. It sold $10.6 billion just last month. Treasury can go out and sell more next week if it is worried about not having cash to pay seniors. It could raise almost $80 billion.
There are many more options for Treasury to get cash, and if the administration had any concern for seniors, it would have had its officials working hard since at least May to ensure that enough cash is available in August. Treasury can easily have $50 billion of cash on August 3 to pay our seniors, if it wants to do that.
Why, then, did the President choose to strike fear into our Nation’s seniors?
Why would the President say to our seniors that he could not guarantee that there would be cash available to pay benefits in August, when he can absolutely guarantee that there will be cash available?
It seems clear that the President has chosen to use fear and to scare seniors in order to boost his chances at reelection and to strengthen the hand of Democrats who are insistent on raising taxes as a means of deficit reduction.
Using Social Security and the financial security of our seniors as bargaining chips in a political poker game over the debt ceiling is shameful. And to do so, to try to raise taxes at a time when unemployment is 9.2% and trending up represents an odd way to express concern about jobs.
The only reason that Social Security payments would not be made in August by the administration would be a conscious choice by the administration to stiff seniors and to blame Republicans. It would be a conscious political choice, not a choice forced by the debt limit or lack of cash.
Mr. President, it is time for me to conclude.
But I want to be clear. The American public has been shortchanged by the new Financial Stability Oversight Council that was created by the job-killing Dodd-Frank financial regulation act. The FSOC, chaired by Treasury Secretary Geithner, has refused and ignored my request for basic information about government finances and government contingency plans in the face of dire warnings of threats to our Nation’s financial stability.
The American people deserve transparency and accountability. Yet, the Administration and its regulators choose instead to withhold information from the people and their elected representatives in Congress.
The refusal by members of the FSOC, including the Treasury Secretary, to provide simple, basic information about government finances is unacceptable and requires investigation and action.