-->By Deborah Lagomarsino
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--The U.S. Treasury Department will start taking emergency maneuvers Thursday to keep financing government operations as the U.S. is set to collide with its $7.384 trillion debt limit.

Treasury said starting Thursday it plans to tap into a government retirement fund for stopgap cash, an extraordinary step taken in previous debt-limit crises.

"By reason of the public debt limit, I will be unable to fully invest the Government Securities Investment Fund ("G-Fund") of the Federal Employees Retirement System in special interest-bearing Treasury securities, beginning on Oct. 14, 2004," Treasury Secretary John Snow said Thursday in a letter to top lawmakers in Congress.

Congress adjourned last weekend without acting on the politically-sensitive issue of raising the limit, forcing the Treasury to begin taking extraordinary steps to avert it. Total U.S. debt subject to the limit stood at $7.374 trillion as of Tuesday.

It is the third time in three years the Treasury has had to take evasive actions to keep borrowing during a debt-limit standoff.

With Thursday's announcement, Treasury will begin to access the $56 billion in the G-Fund and can adjust its use of the fund on a daily basis. Treasury is allowed to access the G-Fund for cash-management purposes in a crisis. Laws governing the G-fund call for lost interest to be restored after the crises has passed.

When Treasury taps the fund, it is essentially moving nonmarketable debt out from under the statutory limit, giving Treasury more room to sell marketable debt. The government does this by replacing the nonmarketable securities in the funds with promissory notes, IOUs promising that the money will be repaid with interest.

"G-Fund beneficiaries are fully protected and will suffer no adverse consequences from this action," Snow said in his letter to lawmakers.

"The statute ensures that once the Secretary of the Treasury can make the G-Fund whole without exceeding the public debt limit, he is to do so," Snow said.