In Case of a Debt Crisis, Break Glass

The US Treasury has a few options if Congress doesn’t cooperate, but they’re all risky

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The deep divide between Republicans and Democrats in Washington over raising the $31.4 trillion debt ceiling has sparked discussion about what the US Department of the Treasury could do to keep making payments on federal obligations if it runs out of funding space. There are several options that bypass Congress. All have drawbacks, though advocates argue they’d be vastly preferable to defaulting on US Treasuries.

Some have been deemed gimmicks, and some are potentially illegal. “None of these ideas are great,” says Darrell Duffie, a Stanford University finance professor and expert on the structure of the US debt market. “It’s all a question of degree.”

Here’s a list of alternatives, along with an assessment of their risks.

THE COIN 

A social media favorite, this one hinges on a 1990s law setting parameters for what were intended to be collectible coins. The legislation provides for the minting of platinum coins of denominations at “the secretary’s discretion.” That would appear to enable the department to mint, say, a $1 trillion coin, which it could then attempt to deposit with the Federal Reserve. The idea is that the Fed could then credit the Treasury’s cash balance by that same amount—giving it the ability to make payments on federal obligations.

Treasury Secretary Janet Yellen has dismissed this idea as a “gimmick,” and she told the Wall Street Journal it’s possible the Fed wouldn’t even accept the coin as a deposit.