The Treasury Department will ask Congress to raise the federal debt ceiling before September to assure that government borrowing is not disrupted, a Treasury official said yesterday.
In addition, the Treasury is studying proposed regulation of the government securities market in light of the failure of a Florida-based government securities dealer in March, which precipitated a run on savings and loans in Ohio and resulted in a temporary shutdown of thrifts there.
John Niehenke, acting assistant secretary for domestic finance, said that Treasury is working with the Securities and Exchange Commission in its investigation of the government securities mishap involving E.S.M. Government Securities Inc. of Fort Lauderdale, Fla.
However, the Treasury is concerned about possible regulation because Americans enjoy the most efficient financial markets in the world and any regulation ultimately could affect the taxpayer, Niehenke said.
"Regulation of the government securities market will be looked at very carefully," he said.
Niehenke also said that investors who lost money in the recent collapse of some government securities dealers should have been sophisticated enough to know whom they were dealing with and should have protected themselves against loss.
The Treasury has taken no position on any legislation to regulate the government securities market, Niehenke said.
The current federal debt ceiling is $1.824 trillion, and the debt is $1.731 trillion. Treasury officials did not say how much of an increase they plan to request.
Meanwhile, the Treasury announced that it is offering $20.5 billion of securities to pay off debt maturing on May 15 and to raise about $9.9 billion of new cash.
The Treasury will issue a three-year note in the amount of $8 billion to be auctioned on May 7. The minimum denomination will be $5,000. A 10-year note in the amount of $6.5 billion will be auctioned the next day with minimum denominations of $1,000.
A 30-year bond in the amount of $6 billion, which will have a minimum denomination of $1,000, will be auctioned on May 9.
All of the auctions will be on a yield basis, and noncompetitive tenders of up to $1 million will be accepted, the Treasury said.
For the April-to-June quarter, the Treasury estimated its net borrowings will be $30.6 billion, assuming a $15 billion cash balance at the end of June.
Including this refunding, the Treasury will have raised $26.4 billion in borrowing this quarter.
During the July-to-September quarter, the Treasury estimates it will need between $55 billion and $60 billion in net borrowing, assuming a $20 billion cash balance at the end of September.