The Federal Deposit Insurance Corporation (FDIC) withdrew a record $40 billion on Friday in its fight for resources to take over the Silicon Valley Bankwhich went bankrupt earlier that day, according to government data, which could have implications for when the Treasury runs out of leeway without a borrowing limit increase.
The FDIC’s withdrawal from the Treasury General Account (TGA) was far larger than any previous one, according to Treasury Daily Statement data for March 10 released late Monday.
Combined with about $13 billion of other federal agency withdrawals on Friday, the Treasury was left with just over $208 billion in operating funds at the TGA, which is held at the Federal Reserve.
The total represents a decline of more than $100 billion from Wednesday’s TGA balance, reported by the Federal Reserve on Thursday.
“The big news … was a $40 billion cash run by the FDIC, which dragged the Treasury cash balance well below our forecast for the day,” Wrightson analysts said Tuesday. ICAP.
RISKS IN SIGHT
Should the Treasury not be able to replace that, the “exit would significantly increase the risk that ‘date X’ could come in June instead of July,” they said.
The so-called “date X” is the point at which the Treasury exhausts the “extraordinary measures” it has been taking recently to continue paying the obligations of the federal government while Congress and the White House argue about whether to lift the limit of 31.4 trillions of dollars of US debt.
The FDIC withdrawal came the same day that Treasury Secretary Janet Yellen warned members of the Republican-controlled House of Representatives that a failure to raise the ceiling would result in a default on United States that would cause an “economic and financial collapse.”
House Republicans insist on big budget cuts and other concessions before agreeing to lift the cap.
Wrightson analysts said there remains enormous uncertainty around when Date X will arrive.
“Our basic outlook on the debt ceiling has not yet changed in light of the unprecedented FDIC disbursement on Friday, but it could change by the end of the week as more details become known,” they noted.
Reuters
