U.S. Treasury Secretary Jack Lew warned Congress in a letter Friday that his department will begin implementing ‘extraordinary measures’ to pay the nation’s bills while lawmakers deliberate over raising the debt ceiling.
The good news is the nation is unlikely to exhaust these extraordinary measures until after the Labor Day Holiday, Lew said. This is months beyond earlier estimates, and Lew has Fannie Mae and Freddie Mac to thank for it.
Lew’s letter to Congress was a direct result of the legislature not approving normal borrowing authority after May 18.
Lew admits profits from Fannie Mae and Freddie Mac have created some uncertainty about the duration of any extraordinary measures deployed by the Treasury since it’s unknown how tax receipts, sequester cuts and payments from the GSEs will impact the budget.
"In the case of Fannie Mae, we learned last week that Treasury will receive a payment of approximately $60 billion on June 28, 2013," Lew wrote.
He added, "Nevertheless, Congress should act sooner rather than later to protect America's good credit and avoid the potentially catastrophic consequences of failing to act until it is too late."