Treasury Confirms Debt Ceiling To Be Breached Today; Will Tap Pension Funds
It's official: the US credit card has officially been maxed out, just as we predicted on Wednesday, and througout Q1 and Q2. The United States is expected to reach the legal limit on its debt later on Monday and will start dipping into federal retirement funds to give the country more room to borrow, a Treasury official said. As Reuters reports further, The U.S. Treasury will settle $72 billion in maturing bonds on Monday, which will push the country right up against its $14.294 trillion borrowing cap, the official said. To all those who thought only the insolvent government of Ireland will plunder pension funds, our condolences.
Full release (no pun intended):
As US Reaches Debt Limit, Geithner Implements Additional Extraordinary Measures to Allow Continued Funding of Government Obligations
Today, the United States has reached the statutory debt limit. Secretary Geithner sent the following letter
to Congress this morning alerting them to actions that have be taken to
create additional headroom under the debt limit so that Treasury can
continue funding obligations made by Congresses past and present. The
Secretary declared a "debt issuance suspension period" for the Civil
Service Retirement and Disability Fund, permitting Treasury to redeem a
portion of existing Treasury securities held by that fund as investments
and suspend issuance of new Treasury securities to that fund as
investments. He also suspended the daily reinvestment of Treasury
securities held as investments by the Government Securities Investment
Fund of the Federal Employees’ Retirement System Thrift Savings Plan.
For more information on these measures, please read this FAQ.
Last Friday, Secretary Geithner also responded to an inquiry from
Senator Bennet regarding the fiscal and economic consequences of failing
to increase the debt limit. That letter can be found here.
Secretary Geithner continues to urge Congress to raise the debt limit
in a timely manner in order to uphold the full faith and credit of the
The Honorable Harry Reid
United States Senate
Washington, DC 20510
Dear Mr. Leader:
I am writing to notify you, as required under 5 U.S.C. § 8348(l)(2),
of my determination that, by reason of the statutory debt limit, I will
be unable to invest fully the portion of the Civil Service Retirement
and Disability Fund (“CSRDF”) not immediately required to pay
beneficiaries. For purposes of this statute, I have determined that a
“debt issuance suspension period” will begin today, May 16, 2011, and
last until August 2, 2011, when the Department of the Treasury projects
that the borrowing authority of the United States will be exhausted.
During this “debt issuance suspension period,” the Treasury Department
will suspend additional investments of amounts credited to, and redeem a
portion of the investments held by, the CSRDF, as authorized by law.
In addition, I am notifying you, as required under 5 U.S.C. §
8438(h)(2), of my determination that, by reason of the statutory debt
limit, I will be unable to invest fully the Government Securities
Investment Fund (“G Fund”) of the Federal Employees’ Retirement System
in interest-bearing securities of the United States, beginning today,
May 16, 2011. The statute governing G Fund investments expressly
authorizes the Secretary of the Treasury to suspend investment of the G
Fund to avoid breaching the statutory debt limit.
Each of these actions has been taken in the past by my predecessors
during previous debt limit impasses. By law, the CSRDF and G Funds will
be made whole once the debt limit is increased. Federal retirees and
employees will be unaffected by these actions.
I have written to Congress on previous occasions regarding the
importance of timely action to increase the debt limit in order to
protect the full faith and credit of the United States and avoid
catastrophic economic consequences for citizens. I again urge Congress
to act to increase the statutory debt limit as soon as possible.
Timothy F. Geithner
Identical letter sent to:
The Honorable John A. Boehner, Speaker of the House
The Honorable Nancy Pelosi, House Democratic Leader
The Honorable Mitch McConnell, Senate Republican Leader
cc: The Honorable Dave Camp, Chairman, House Committee on Ways and Means
The Honorable Max Baucus, Chairman, Senate Committee on Finance
The Honorable Orrin Hatch, Ranking Member, Senate Committee on Finance
All other Members of the 112th Congress
Colleen Murray is Spokesperson for Domestic Finance.