Monday, February 6, 2023
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U.S. Treasury launches another strategy to avoid breaching the debt ceiling

David Lauder

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen on Tuesday launched another unconventional cash management measure to avoid breaching the federal debt ceiling, Suspending the daily reinvestment of large government pension funds that hold U.S. Treasuries, the department said.

In a letter notifying Congress of the use of the Government Securities Investment Fund (G Fund), Yellen did not change the expected early June deadline if not increased 31. The $4 trillion legal borrowing limit, the Treasury may no longer be able to pay the country’s bills.

“The regulations governing G Fund Investments expressly authorize the Secretary of the Treasury to suspend investments in G Funds to avoid violating the statutory debt ceiling,” Yellen wrote in a letter to House Speaker Kevin McCarthy, R-Calif., and other members of Congress. wrote the leader’s letter. “My predecessors took pause in similar circumstances.”

Yellen last week suspended reinvestment in two other retirement and health benefit funds as the government nominally hits its debt ceiling . Republicans, who now control the House of Representatives, have threatened to oppose a Biden administration raising the debt ceiling without spending cuts.

The G-Fund strategy is one of the largest tools the Treasury can use to restore borrowing capacity under the debt ceiling. The fund, part of the Thrift Savings Program for Federal Employees, had net assets of $9 billion at the end of 210 according to its most recent annual report.

Typically, money market-like retirement funds reinvest their entire balances daily in specially issued Treasury securities that count towards the debt limit. Stopping reinvestment allows for more normal Treasury bills, notes, and bonds to be issued.

But the law requires the Treasury to replenish the fund, along with any lost revenue, once the debt-limit impasse ends. Federal retirees and employees will not be affected by this action.

“I respectfully urge Congress to act swiftly to protect the full confidence and integrity of America,” Yellen wrote, repeating a set phrase throughout her speech. Letter to Legislators.

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