#musk

Karen Petrou: Payment-System Politics and the Havoc It Wreaks

Shane Smith2025-02-10T09:16:53-05:00February 10th, 2025|The Vault|

Any bank that granted even just “read-only” access to its payment services with as few controls as the U.S. Treasury would and should be harshly sanctioned by its supervisors. Who steps in to ensure the smooth functioning of the multi-trillion Treasury payment system? Do any of Mr. Musk’s operatives know what would happen if they pulled the wrong plug and disabled critical payments on U.S. debt or to American citizens such as those for Social Security? And, what if they don’t care if they disrupt payments if they believe this suits a political purpose?

When I wrote my memo last week hoping that these fears are alarmist, we didn’t know then what we know now about unlimited payment system access by a key DOGE warrior since named to head the Fiscal Service and the youth, inexperience, and dubious histories of the payment-system teams. Do any of them know that payment-system finality is an essential element of payment-system credibility and financial-system stability or do they view the payment system as a video game with a prize for the team member who finds the target that rings the loudest political bell? Do any of these Trump appointees know that making even a little mistake could be catastrophic in a system handling trillions of dollars in billions of transactions or are they looking for viral moments on encrypted social-media platforms so they become the envy of like-minded young men?

As FedFin noted last week, what Congress and the press took as a pledge …

Karen Petrou: Why Playing with Treasury’s Payment System is Playing with Fire

Shane Smith2025-02-03T09:04:54-05:00February 3rd, 2025|The Vault|

In just two weeks, Donald Trump has done something no one ever expected which he may not even intend: overturning the axiomatic expectation that a full-faith-and-credit obligation of the United States government is the best there is. Now, the U.S. will honor its commitments only if it still likes them. Anything that upends financial-market axioms stokes systemic risk and stoking is now so heated that it threatens even the multi-trillion Treasury market on which U.S. prosperity and global financial stability depend.

Is this alarmist? Yes, but then who would have thought the White House would issue an edict freezing all federal funding or maybe just some federal funding even though more than just some federal funding was frozen? Who would have thought the U.S. would cease all but a very few foreign-aid payments including those with other sovereign governments no matter which geopolitical or humanitarian interests are sacrificed? Even if some of this was audible on the campaign trail, none of it was thinkable to anyone counting on constitutional checks and balances along with a sound sense by someone in the White House of second-order effects.

It is in this context that one more Trump Administration action is particularly worrisome and why I fear even for the once-sacrosanct promise that the U.S. will not just honor its commitments, but also pay its bills. Elon Musk’s acolytes at DOGE have now been granted unfettered access to the Treasury payment system. Why?

Maybe it’s just curiosity or maybe DOGE wants to update …