Tuesday, December 05, 2006

The Morons at Treasury

HT The Asian Badger, from Forbes:

Our Treasury department wins the booby prize for the way it has managed in recent years the servicing of our national debt, the publicly held portion of which now comes to $4.9 trillion. When interest rates were plunging in 2000–03, these geniuses decided to shorten the average maturity instead of locking in long-term low yields. In 2001 they even eliminated the issuance of 30-year bonds and only recently have revived this instrument. In the private sector such foolishness would have led to quick termination, perhaps even criminal indictment, for deliberately wasting shareholders’ money.

...Right now 2-year Treasurys yield more than 10-year or 30-year bonds. Yet the portion of the national debt with a maturity of more than 20 years has dropped from 12% in 2000 to 5% currently. Debt with a maturity range of one to 10 years has zoomed from 42% in 2001 to more than 53% last year.

All this would be similar to a homeowner forsaking a 4.5% fixed-rate 30-year mortgage for a variable-rate mortgage of nearly 5%.

If, say, $1 trillion of 2-year debt had been financed with 30-year bonds, the savings over 30 years–assuming no change in interest rates–would be almost $150 billion.

Of course, it all depends on your point of view. The cost of money is irrelevant to those who have the guns and can extort whatever-the-Hell they want from the suckers downhill.

How DOES GWB manage to find these folks?


Anonymous said...

How DOES GWB manage to find these folks?

He found them, I'd bet, at GOP fundraisers, possibly at Daddy's. That's how business is done, I'm afraid.

Anonymous said...

WMC is full of guys like that.

George promised a CEO Administration. Who knew that the CEO would be Kenny Boy?