The chart illustrates ownership of US government debt at the end of December 2010. US ownership is subdivided by category, foreign ownership by country. The foreign data are not broken down in to categories, but TIC indicates that 3/4 of foreign-owned US government debt is held by public authorities. The domestic data come from the June 2011 Treasury Bulletin and the foreign from the Treasury TIC. More recent data on foreign ownership exists. I could not find more recent data for US ownership. If I have mis-interpreted this data, someone please point this out.

By these figures, about 63% of US government debt is owned by central banks (foreign and domestic) and/sovereign wealth funds. Most of these entities are American friends and allies. Another 4% is owned by US state and local governments. That leaves 33%--about $4.8 trillion--in private hands. Of this, the financial institutions with the most restrictive regulations regarding asset ownership (depository institutions) own only 2% of the total ($290 billion). Mutual Funds, who may or may not have to dump downgraded debt, hold another 9% ($1.35 trillion).

What's the point? The discussion about the impact of US default revolves around the market response to default. Useful to recognize that most of the US government debt is held by public-sector agents who are much less sensitive to balance sheet pressures and regulatory constraints. These public sector agents are also substantially more sensitive to "moral suasion" and direct appeal than private financial institutions. The structure of ownership of US debt might dampen the negative impact of any default that does occur.