O'Neill says govt faced using 'fraudulent' measures if debt limit not raised:
WASHINGTON (AFX) - Had Congress not raised the debt limit last night, the Treasury Department faced the prospect of taking possibly fraudulent measures to keep under the ceiling -- emulating the corporate accounting scandals of recent months, said Treasury Secretary Paul O'Neill.
"If it had not been increased, it would have put we in the Treasury in the position where we would have had to make a choice between defaulting (on debt payments) or... using shaky, I might even say potentially fraudulent, accounting devices to paper over a lack of action by the Congress," O'Neill told reporters.
"I'm very pleased we didn't reach that point, because... I do not think we in the Treasury should put ourselves in the position of where we could be accused... of following the horrendous accounting policies and practices that have come to the surface in private companies in recent months," he added.
This is the first time a Treasury official has linked Treasury's range of potential maneuvers to keep the debt within limits to corporate accounting scandals.
Since May, the Treasury has tapped a variety of government trust funds, including a civil servants' retirement fund, to provide space for market borrowing and rolling over maturing Treasury securities without breaching the 5.95 trln usd debt ceiling.
Last night, Congress approved a 450 bln usd increase in the limit, which O'Neill said would last until the end of the year or "early next year."
The Treasury Secretary said Congress should look at abolishing the debt limit, which only serves to put a question mark over the future willingness of the US government to fulfil its debt payment obligations.
This is important because "we must and we will set the standard for integrity in accounting practices and policies," he said.
The Treasury would have been forced to leave more government pension funds disinvested in coming days in order to prevent a debt default, according to private analysts, if Congress had not raised the limit.
"It ought to be clear that we in the Treasury ... will not invent questionable techniques to substitute for actions that are necessary by the Congress," O'Neill stressed.
"It would be consistent with what the reality of the world is for the Congress to abolish the practice of the debt ceiling," O'Neill stated, although the Bush administration itself will not propose such legislation.
"I don't think we should be prescriptive," he said, as it is up to the legislature itself to act.
O'Neill called Republican House of Representatives leaders last night after the narrow passage of the debt limit increase, thanking them for the action.
Noting how small the margin of victory was, O'Neill said "it took some courage to get this done."
The House voted 215-214 in favor of the measure previously cleared by the Senate, with 3 Democrats joining most Republicans to ensure passage.
President George W Bush must sign the bill into law to take effect. The Treasury said earlier that he must sign it before Monday, because today's 2-year note auction will settle Monday, and additional borrowing authority is needed to accommodate the issue.
White House spokesman Ari Fleischer said Bush will sign it "as soon as he gets it," and a Treasury spokesman said the White House has given assurances it will be signed by Monday.
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