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Richard Pollack of the The Daily Caller News Foundation has something of a blockbuster news scoop out today. Here, documents obtained from the New York branch of the U.S. Federal Reserve by the U.S. House of Representatives’ Financial Services Committee would appear to confirm that the Fed was directed by U.S. Treasury Department officials to not answer questions from the U.S. Congress about the real risk of the U.S. government defaulting after the nation reached its debt ceiling in 2011 and in 2013.
Specifically, the New York Fed’s officials were directed to not answer questions from Congressional oversight committees that would reveal that the Fed had found that the risk of the U.S. government running out of its ability to borrow more money to keep its operations going was much, much lower than the Obama administration was making it out to be, because the Fed determined that the U.S. Treasury Department was fully capable of prioritizing payments to the U.S. government’s creditors – a direct contradiction to the public statements made by the Obama administration at the time.
Here is the introduction to the story:
Federal Reserve Bank of New York officials secretly conducted real-time exercises during the 2011 and 2013 debt-limit crisis that demonstrated the federal government could function during a temporary shutdown by prioritizing spending, even as Treasury Secretary Jack Lew publicly claimed many times that such efforts were “unworkable,” according to a new report by the House Financial Services Committee obtained by The Daily Caller News Foundation.
The staff report, to be released Tuesday, charges that Lew and other Obama administration officials deliberately misled Congress and the public during the federal budget and debt limit showdowns in both years. The committee will convene a public hearing on the report Feb. 2.
The report also states that the Obama administration crafted actual contingency plans to pay for Social Security and veterans benefits, as well as principal and interest on the national debt if the government was temporarily unable to borrow more money. The Committee concludes that over the last two years the Treasury Department has “obstructed” congressional efforts to get to the bottom of the administration’s real-time policy during the two showdowns.
The Constitution stipulates that only Congress can determine how much money the federal government can borrow. Presidents thus cannot unilaterally spend beyond congressional debt ceiling limits set. The committee — chaired by Republican Rep. Jeb Hensarling of Texas — charged that during both confrontations, the Obama administration held the country’s creditworthiness “hostage” by claiming default was the only possibility if the debit ceiling was not raised.
“These internal documents show the Obama Administration took the nation’s creditworthiness and economy hostage in a cynical attempt to create a crisis so the president could get what he wanted during negotiations over the debt ceiling,” Hensarling said in a statement to be released with the report Tuesday.
The report also revealed that the Treasury Department did not publicly divulge its plans to prioritize payments “for the express purpose of creating market uncertainty in an effort to pressure Congress to acquiesce in the administration’s ‘no negotiation’ posture on the debt ceiling.”
Wisconsin Republican Rep. Sean Duffy, the financial services panel’s oversight subcommittee chairman, said the administration “manufactured a crisis to put politics ahead of economic stability.”
Please do read the whole story.
As a result of that withheld knowledge, U.S. financial markets were effectively manipulated by the Obama administration into a more unstable performance than would have been the case if the truth were allowed to be known. An instability that served the administration’s political purposes, even though the consequences would damage the value of investments held by regular Americans, including millions of retirees.
That damage wouldn’t appear to have been much of a concern for an administration that was unwilling to restrain its desire to spend.