US federal debt plays a special role in the US economy and so gives the US government a funding advantage, often summarized by the “convenience yield” on US debt. Why? One reason is that government regulation (and/or repression) of the financial sector influences asset pricing and helps makes long term US federal debt a “safe-asset”. We study the macroeconomic consequences on government borrowing capacity, financial stability, and investment. We then test our theory using new historical data on US convenience yields going back to 1860 and data from the Eurozone sovereign debt crisis.