The Goldman Sachs Group, Inc. ~ 200 West Street ~ New York, New York 10282

Te1:212-902-1000

~a~man

September 21, 2021

The Honorable Janet Yellen

Secretary

Department of the Treasury

1500 Pennsylvania Avenue, NW

Washington, D.C. 20220

Dear Madam Secretary:

As the Chair and Vice Chair of the Treasury Borrowing Advisory Committee, we are deeply

concerned about the market consequences that could arise should Congress fail to raise, suspend,

or eliminate the statutory debt limit in a timely manner. The U.S. Treasury has been employing

extraordinary measures since August 2nd to avoid breaching the debt limit, but these tools will

soon be exhausted, leaving Treasury with insufficient funds to meet all of its financial obligations.

If left unresolved, this situation would put the U.S. government at risk of missing debt payments—

an outcome that would have severe consequences for the U.S. Treasury market and, ultimately, for

the U.S. economy. Even if default were avoided, continued negotiations over the debt limit could

cause needless volatility, create additional operational expenses for market participants, and do

lasting damage to the Treasury market.

Having a liquid, well-functioning Treasury market provides a tremendous advantage to the United

States. The events of the past year and a half underscore this point. The federal government could

not have launched its swift and forceful fiscal response to COVID-19 without the capacity to

borrow large amounts of funds in a rapid and efficient manner. Since early 2020, Treasury has

been able to borrow more than $5 trillion, on net, mainly to fund the relief packages passed by

Congress. Past legislative actions already necessitate taking Treasury debt far above the current

limit. Raising, suspending or eliminating this antiquated constraint would simply authorize

Treasury to fulfill the obligations that Congress has already approved.

If a protracted fight over the debt limit casts doubt on the creditworthiness of the U.S. government

or the timeliness of its debt payments, the Treasury market would likely experience significant

disruptions that could spark broader market stress. It may become difficult to buy or sell some

Treasury securities, given uncertainty about their payment status and operational complexities.

The repo market could come under pressure, making it difficult to fund holdings of Treasury

securities. Investors might pull back from money market funds in a rapid manner, setting off

forced selling of securities. Dealers and principal trading firms could pull back on market-making

activity in the presence of heightened volatility and uncertainty.
~o~man

If is always difficult to anticipate the full chain of events that could arise during periods of market

stress. However, as we saw in March 2020, stress in the Treasury market can unfold in a cascading,

self-reinforcing manner and reverberate throughout financial markets, tightening financial

conditions and likely damaging astill-fragile economic recovery.

Further, we are concerned that prolonged debt ceiling uncertainty could cause long-lasting

reputational and economic impacts on Treasury securities. Today, Treasuries are seen as a deeply

liquid investment that is free of default risk, and as such, they command a premium for their

money-like status. This status affords the government the ability to fund in large capacity and at

attractive terms. However, legislative debate that brings the federal government perilously close

to defaulting erodes investor confidence, raises the prospect of a downgrade in the U.S.'s credit

rating, and could have damaging effects on demand for Treasuries right as our nation's debt rises

to new peaks (now $28 trillion).

It is our considered judgment that near-term action by Congress is required to preserve the

tremendous benefits that the U.S. Treasury market provides to taxpayers and to avoid the immense

damage a missed payment could have on the Treasury market and U.S. economy. We encourage

you to continue working with Congress to raise, suspend, or eliminate the debt ceiling

immediately. To default would be unthinkable, but even to risk that outcome would be reckless

and irresponsible.

Respectfully,

~~--

Beth ammack

Chair, Treasury Borrowing Advisory Committee

Brian Sack

Vice Chair, Treasury Borrowing Advisory Committee