Treasury Secretary Donald T. Regan asked Congress yesterday for a "significant increase" in the nation's debt limit, which otherwise will be exceeded on Feb. 18, according to Treasury estimates.
At the same time, the Treasury announced it plans to raise $35.9 billion from the markets during the current quarter, up from the $18 billion to $22 billion originally estimated. The Treasury also said it expects to raise between $2 billion and $5 billion in the April-to-June quarter, normally a budget-surplus quarter because of heavy tax payments. It predicts cash balances of $8 billion at the end of March and $15 billion at the end of June.
The agency intends to raise $3.6 billion of new cash next week at the regular quarterly refunding, John Schmidt, deputy assistant secretary for debt management, told reporters yesterday.A total of $8.5 billion of securities will be offered in three sparate issues to refund $4.9 billion of maturing debt, he said.
Meanwhile, in a major upstate New York bank lowered its prime rate to 19 1/2 percent from 20 percent and cut its broker loan rate by 1 percentage point to 19 1/2 percent. Marine Midland, the nation's 12-largest commercial bank, was the first major bank to lower its prime to 19 1/2 percent, and it was not followed by any others yesterday. A spokesman for the bank said that the current cost of liabilities justified the lower rate.
Several other banks yesterday lowered their broker loan rates -- charged to securities firms on loans backed by stock as collateral -- to 20 percent in a move which could pave the way for further reductions in the prime. The key federal funds lending rate was slightly lower yesterday, hovering between 13 percent and 17 percent.
Regan said in his statement that "it is with great regret" that the administration was asking for a higher debt limit. "Yet the conditions of the economy and government commitments that we have inherited leave us no choice in this matter," he added.
The Carter administration had asked Congress for a debt limit of $935.1 billion through September. Regan asked for an increase in this limit to $985 billion, $5 billion less than the amount appropriate for the Carter administration's estimate earlier this month of its credit needs for this financial year. The latest limit is not "based specifically" on the new administration's planned economic package, as this is not yet ready.
But Regan promised that the economic package, "if promptly enacted, will significantly reduce the future rate of growth in federal borrowing." He said it is important "that both the administration and the Congress begin working together immediately to slow down this runaway federal borrowing."
[Reaction in the bond market to the February refunding announcement was slight, but dealers noted that they were disappointed by the unexpectedly large size of the Treasury's new long bond, Dow Jones News Service reported.]