Treasury wants to borrow another half trillion

Notice who is urging this borrowing? Investors, in the test I boldfaced.  Right on schedule, just prior to the recession, investors pile on debt  as the government cannot pay its bills.

By Jason Lange

WASHINGTON (Reuters) - The U.S. Treasury wants to increase its daily cash holdings, a measure that would help Washington pay its bills during a crisis, a senior official said on Wednesday.

If adopted, the new policy would help the government in the event an emergency shut down markets and left Washington unable to borrow money to pay creditors and other obligations.

"Holding more cash on hand is a prudent measure," Treasury Assistant Secretary Matt Rutherford said in a news conference.

He said the measures would help public finances weather events like the Sept. 11, 2001 attacks or 2012's Superstorm Sandy, both of which disrupted Wall Street trading. Washington borrows vast sums in weekly auctions to pay its bills.

Investors who met with Treasury officials on Tuesday urged the government to increase its daily cash holdings to around $500 billion. That would be enough to cover about 10 days worth of outlays.

A change in policy, however, would not buy the government any additional time if it runs into a legal limit on borrowing next year.

Current law will limit the amount of cash Treasury can hold when a cap on federal borrowing becomes binding again in March 2015. The U.S. government suspended the debt ceiling in February of this year.

Even if the Treasury changes its cash management policy, it would be obligated to reduce its daily balance to around $33 billion in March, Rutherford said. The Treasury held about $66 billion in cash on Monday, a typical level in recent months.