Treasury General Account

And Scott Bessent has basically come out to the market and basically said, "Look, we're going to buy our own debt.

You know, we, we're gonna, we, we're gonna double it, we're gonna triple it." And ultimately, he's got an account called the Treasury General Account.

There's a trillion dollars in that account, which he could call on to buy back their own debt.

And there are many other means that they can, they can deploy.

How do you view your work since you work on treasuries and treasury markets? And part of what you do is broader than just the Fed, as you mentioned.

But from the Fed's perspective, do you view your role as, hey, we're the Fed, we're the bank for the federal government, we're the fiscal agent for the federal government that includes, you know, dealing with treasuries, TGA? Or is it, hey, we're the Fed.

We have this big balance sheet with a lot of treasuries on it.

How do you kind of view your work from what prism or maybe both?

And we mentioned Secretary Besson wants to double the size of it, wants to use it on the long end of the Treasury curve too, moreover.

But something that was exciting, I guess exciting is too strong.

Something that was interesting that came out of this TBAC meeting was the idea that Treasury could start repoing its TGA balances or its cash.

So instead of just parking cash at the Fed earning nothing, it could actually invest it in the repo market.

Second is they can always increase buybacks, right? Depends on the offers they get on the buyback announcements so that they can increase the amount of that.

I'm a little skeptical around the TGA just because like next year we're going to have to deal with the debt ceiling.

And I don't think you want to be meddling with the TGA when you're in extraordinary measures, because I have no clue how that would play out.

And I don't think there's any precedent for it.

And obviously like, an accidental default is still a default.

They do have some time, right? That probably doesn't hit until the summer of next year.

And so I've been a little skeptical.

They utilize the TGA, but I think beyond that, right from a policy measure, like outside of just the treasury, So implementing credible fiscal reforms that puts debt levels on a more sustainable path and increases the probability of below-trend growth next year, I think we'll go a long way to get the rate structure lower.

They asked the Federal Reserve to allocate more gold to the gold certificate.

When they did that, they could write up the value by that amount and then put the money in what's called the TGA, or the Treasury General Account.

So they did that.

It was an accounting entry.

Okay, we talked about that.

But here's a way for the treasury to get $1 trillion in cash in their bank account at the Fed.

That's where the TGA is.

It's the treasury's bank account at the Fed.

One is, what's your views on the use of, or suggesting that they should use the FEMA repo facility at the Fed? as a complement, substitute, I don't know what to use here, for other formal effects intervention.

And then the second one, if you had any views on, CNBC suggested that the Treasury may actually use the Treasury General Account to fund debt buybacks to bring long-term rates down.

That sounds really as the FLE or a QE formal intervention.

Both of this Yen and this use of TGA kind of entrench Talk about a little bit the, I don't know what you said, threat to the Fed balance sheet independence, if I can use those words.

We're going to, you know, he said, we've got a war chest.

He even mentioned that he may tap into the treasury general account, which has about a trillion dollars in it.

He's going to

buy them all.

So Scott Besant came out and said he's going to go from $2 billion to $4 billion in the buybacks.

He then came out on CNBC and said, we're going to buy back more than $4 billion.

Actually, we've got this thing called the Treasury General Account, which has a trillion dollars in it.

So Scott Besson has indicated that he's going to buy back all these treasuries.

I'll give you 950 billion reasons to buy bonds right now.

It's called the Treasury General Account.

And everyone said, you know, they're not taking him serious because he said that he was going to buy bonds and yields went up anyway.

Well, the first operation doesn't start until September 9th.

Exactly.

The ultimate fear centers on the Treasury General Account or the TGA.

Which is essentially the U.S. government's checking account held at the Federal Reserve.

And its balance frequently hovers around $1 trillion.

So they came up with a different approach.

We're going to use a treasury general account.

That is the cash account, if you like, the deposit account of the treasury that has almost a billion dollars in it.

But that money is supposed to be for a rainy day on the budget.