US Treasury activates another measure to avoid debt cap breach

In a letter notifying Congress of the transfer, Janet Yellen didn't alter a projected deadline of hitting debt cap by June.

Final week the US authorities nominally reached the debt ceiling [File: Patrick Semansky/AP Photo]

US Secretary of the Treasury Janet Yellen activated one other extraordinary money administration measure on Tuesday to keep away from breaching the federal debt restrict, suspending every day reinvestments in a big authorities retirement fund that holds Treasury debt, the division mentioned.

In a letter notifying Congress of the transfer to entry the Authorities Securities Funding Fund (G Fund), Yellen didn't alter a projected early June deadline for when the Treasury might now not have the ability to pay the nation’s payments with out a rise within the $31.4 trillion statutory borrowing restrict.

“The statute governing G Fund investments expressly authorizes the Secretary of the Treasury to droop funding of the G Fund to keep away from breaching the statutory debt restrict,” Yellen wrote within the letter to Home of Representatives Speaker Kevin McCarthy, a Republican, and different congressional leaders. “My predecessors have taken this suspension motion in comparable circumstances.”

Yellen final week suspended reinvestments in two different retirement and well being profit funds as the federal government nominally reached the debt ceiling. Republicans who now management the Home have threatened to oppose a debt ceiling improve with out spending reductions from the Biden administration.

The G-Fund manoeuvre is without doubt one of the largest instruments that the Treasury can make use of to reclaim borrowing capability beneath the debt ceiling. The fund, a part of the Thrift Financial savings Plan for federal staff, had internet property of $210.9bn on the finish of 2021, in response to its most up-to-date annual report.

Usually, the cash market-like retirement fund reinvests its complete steadiness every day into special-issue Treasury securities that depend in opposition to the debt restrict. Halting the reinvestments permits extra regular Treasury payments, notes and bonds to be issued.

However the Treasury is required by regulation to replenish the fund, together with any misplaced earnings, as soon as a debt restrict deadlock ends. Federal retirees and staff can be unaffected by this motion.

“I respectfully urge Congress to behave promptly to guard the total religion and credit score of america,” Yellen wrote, repeating a daily line in her letters to lawmakers.