GAO Report on Treasury ‘G’ Fund Raid

Post Update 2/26/2013: TSP Funds made Whole by the Treasury Dept-  ‘G’ Fund ‘raid’ is over (for now).

Recently the TSP Director issued a statement reassuring TSP members that their investments in the G Fund are safe, and that any short term borrowing performed by the Treasury as a part of its ‘extraordinary measures‘ in dealing with the debt ceiling will not affect TSP participants.

He referenced the recent GAO report reviewing the recent raid on the G Fund.

For those who do not wish to read all 39 pages of the GAO report, the key findings are:

• G Fund investors during the previous ‘raid’ were made whole, and that the Treasury Department borrowing against the G Fund is legal as “required by subsection 8438(g) of title 5, United States Code” (page 19).
• Treasury Yield spreads drop during the ‘raid’ periods (page 22).

When yield spreads drop, it gets more expensive for the Treasury to borrow.   So while the effect on the TSP G Fund investor is negligible, the overall effect on the U.S. Taxpayer is increased cost.

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