Sep
29

Debt Debacle

If the debt ceiling isn’t raised, the Fed could ameliorate some of the worst impacts. It could offer to buy unlimited amounts of defaulted Treasuries, preventing panic selling. It could similarly sell some of its Treasury stock that is not in default. The Fed could allow banks to count defaulted Treasuries towards their regulatory capital. It could also allow bank capital ratios to temporarily slip if huge cash demands materialize.

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