Another lesser-used move, usually a last resort, is to suspend reinvestment of the Exchange Stabilization Fund, which currently holds about $21 billion in special Treasury securities.
The fund is used to buy, sell and hold foreign currencies and provide financing to foreign governments. Treasury doesn’t like to use this tool since current law doesn’t allow for restoration of lost interest; it’s been used sparingly, including in the final weeks of the 2011 debt ceiling standoff that led to a decade of spending cuts.
Speaker Kevin McCarthy and other House Republicans are again pressing for spending cuts in exchange for their votes to lift the debt ceiling, though White House officials and top Democrats have generally rejected any negotiations over raising the borrowing ceiling.
In her letter last week, Yellen said it’s “critical that Congress act in a timely manner to increase or suspend the debt limit.” Failing to meet the government’s obligations, she said, “would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.”
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