U.S. Treasury activates another maneuver to avoid breaching debt limit


WASHINGTON, Jan. 24 (Reuters) – US Treasury Secretary Janet Yellen on Tuesday initiated another extraordinary cash management measure to prevent the federal debt limit from being breached.

In a letter notifying Congress of the move to access the Government Securities Investment Fund (G Fund), Yellen did not change the expected early June deadline for when the Treasury may no longer be able to pay the country’s bills without an increase in the $31.4 trillion regulatory borrowing limit.

“The statute governing G Fund investments expressly authorizes the Treasury Secretary to suspend G Fund investments to avoid exceeding the legal debt limit,” Yellen wrote in the letter to the president of the House of Representatives, Kevin McCarthy, a Republican, and other congressional leaders. . “My predecessors have taken this suspension in similar circumstances.”

Yellen suspended reinvestments in two other pension and health funds last week as the government nominally hit its debt ceiling. Republicans now controlling the House have threatened to oppose a debt ceiling increase without budget cuts from the Biden administration.

The G-Fund maneuver is one of the largest tools the Treasury can use to reclaim borrowing capacity below the debt ceiling. The fund, part of the Thrift Savings Plan for federal employees, had net assets of $210.9 billion at the end of 2021, according to its most recent annual report.

Normally, the money market-like pension fund reinvests its entire balance daily in special Treasury securities that count towards the debt limit. By stopping reinvestments, more normal Treasury bills, notes and bonds can be issued.

But the Treasury is required by law to replenish the fund, along with any lost revenue, once a debt limit deadlock is ended. Federal retirees and employees would not be affected by this action.

“I urge Congress to act quickly to protect the full faith and honor of the United States,” Yellen wrote, repeating a line in her letters to lawmakers.

Reporting by David Lawder; Edited by Tim Ahmann and Jonathan Oatis

Our Standards: The Thomson Reuters Principles of Trust.

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