Civil Service Fund Interest Is Diverted Treasury Secretary Seeks To Avoid Defaulting

Treasury Secretary Robert E. Rubin said Wednesday he will divert a $14.5 billion interest payment due a federal retirement fund to keep the Treasury from defaulting at the end of this month should Congress refuse to increase the debt limit.

Use of the payment, owed to the $360 billion-plus Civil Service Retirement Fund, will keep the Treasury below the current $4.9 trillion ceiling on federal borrowing authority “until the end of January and possibly into the first week of February,” Rubin said at a hearing of the House Banking Committee.

Ordinarily, the treasury secretary must invest the entire year-end interest payment to the retirement fund in government securities, thus reducing by the amount of the payment the Treasury’s statutory borrowing authority. But Rubin said Wednesday that, to avert default, he plans to hold the payment in cash temporarily, crediting the retirement fund with a IOU that would not be counted against the statutory limit.

Rubin conceded that the action was unusual but stressed that the law provided for full restoration of any interest to the retirement fund once Congress and the White House reach agreement on a debt limit increase.

Rubin’s actions angered Republicans, several of whom renewed charges that he had circumvented spending powers granted Congress by the Constitution.