Wells Fargo: U.S. Can Avoid Default Until September

July 26, 2011

By Jillian Berman and Betty Liu -Bloomberg News

The U.S. government can avoid a default for at least a month after the Aug. 2 deadline to lift the debt ceiling set by the Treasury Department, said John Silvia, chief economist at Wells Fargo Securities LLC.

“The Federal Reserve and the Treasury can work together to generate enough cash probably for the next two or three months to avoid any kind of automatic default on the Treasury debt,” Silvia, who is based in Charlotte, North Carolina, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “There’s a way of getting around this issue for at least another month or two.”

Political party leaders are preparing dueling plans for raising the U.S. debt ceiling, unable to break a partisan stalemate over how to tackle the nation’s $14.3 trillion debt by Aug. 2. That is the date when the Treasury Department says its borrowing authority will end.

Greater-than-forecast tax revenue might give the Treasury until Aug. 10 before it runs out of cash, Barclays Capital said in a report last week.

“Tax-receipt inflows from July 14 to date have been considerably stronger than we were expecting,” New York-based Barclays analysts, including Ajay Rajadhyaksha, said.

Inflows over the five-day period from July 14 were about $14 billion higher than Barclays had foreseen, and outlays were about $1 billion less, according to the report.

Two-Step Plan

House Speaker John Boehner, an Ohio Republican, told party members he plans to force action on a two-step debt-limit extension that would provide a $1 trillion, shorter term increase than President Barack Obama has requested, defying a veto threat.

To read more, visit: http://www.bloomberg.com/news/2011-07-25/u-s-can-avoid-default-at-least-until-september-silvia-says.html


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