It Takes Two To Buy And Sell A Platinum Coin
One of the ideas discussed during the fiscal cliff debacle in late 2012 and early 2013 to deal with the GOP's intransigence on raising the federal debt ceiling was the platinum coin trick.
The idea was pure genius. Using previously-granted legal authority, the Treasury would mint a platinum coin with a face value of $1 trillion and would sell that coin to the Federal Reserve which would then credit the U.S. government with the cash. That would eliminate the need for additional government borrowing any time soon and...presto...the White House's debt ceiling problem would go away.
The White House eventually said no to the platinum coin trick by saying that it didn't have legal authority to do the sale. It also became apparent when the administration rejected the other debt ceiling escape hatches like the 14th amendment that the White House's political strategy was to keep the pressure on congressional Republicans by making them deal with the one and only debt ceiling process: voting on it.
Ryan Reilly at the Huffington Post today posted a story based on documents obtained through a Freedom of Information Act request that the White House had a memo from the Justice Department saying that the platinum coin trick was legal. The implication of Reilly's piece is that the administration's decision not to go with the coin was purely political.
That's missing one key point. The trick doesn't work if all you have is a platinum coin to sell; you also have to have a buyer and the Federal Reserve said at the time that it wasn't interested.
The administration could have said it wanted to do the coin trick but the Fed wouldn't let it, but that would have created some public animosity between the White House and congressional Democrats and the Federal Reserve at a time when they both needed monetary policy to help the economy. It also would have poured fuel on the political fire that existed at the time between the Fed and congressional Republicans.
So the administration decided to take the blame itself. It claimed that there was no legal authority to do the coin trick and in the process protected the Fed.
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