Federal Reserve official Neil Kashkari reiterated Treasury’s concern on Tuesday over the country’s looming debt ceiling crisis, and although he remains unsure how likely a potential default could be, the central banker’s comments came a day after Bank of America chief Said that the organization is gearing up for this. worst.
Speaking to CNN on Tuesday morning, Kashkari said he “absolutely” agreed with Treasury Secretary Janet Yellen that a US debt default would be “catastrophic” if Congress fails to extend or suspend the debt ceiling until June; The limit was breached on 19 January, prompting the Treasury to undergo “extraordinary measures” to help pay its obligations for a few more months.
Kashkari, however, did not say whether the debt crisis looks riskier now than before. puzzle This led to a market correction in 2011, reiterating Yellen’s warnings the previous month, when she warned that a default would cause “irreparable damage” to the economy, endanger basic government functions (such as national defense) and send the dollar and stocks crashing down the drain. washed out.
“I hope that the political leaders in Washington . . . will come up with a solution,” Kashkari said, adding the divided Congress, currently with a Republican-led House and Democratic Senate, “will come together and reach a solution.” need to reach.
The comments come a day after Bank of America CEO Brian Moynihan Said“Expectation is not a strategy,” as he added that the bank has already begun to prepare for the possibility of a default by reducing liquidity and setting up payment waivers for customers receiving payments from the government.
Moynihan acknowledged that lawmakers on both sides of the aisle have said they do not want to risk a default in talks over the debt ceiling, but he echoed experts’ concerns that could spook markets, saying “Right now, we’ve got issues to overcome.
"There is a temptation to brush off the developing debt ceiling drama, thinking it will end with others getting together and signing legislation," Mark Zandi, chief economist at Moody's Analytics, wrote in a note to clients last month. with doing." , “It would be a mistake given the growing dysfunction in the Congress. , , , The chances that lawmakers err, either out of intent or ineptitude, are uncomfortably high.
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House Speaker Kevin McCarthy (R-Calif.) has repeatedly Mortgage The US would avoid a debt default, but it is unclear what compromise Democrats and Republicans would make to prevent one. In the deal to elect him as speaker last month, McCarthy promised Congress would not agree to raise the debt ceiling without significant spending cuts. some republicans have Ongoing Raising the age for Medicare and Social Security eligibility in an effort to reduce the federal deficit — an idea that Senate Democrats would reject.
According to treasuryCongress has either raised, raised, or modified the definition of the debt ceiling, which limits the amount of debt the Treasury can issue to meet the government's obligations, 78 times since 1960. does, and it has not yet failed to act on the issue when necessary. , Still, many economists warn that this year's debt ceiling debacle could be the worst since the 2011 crisis, which plunged the S&P 500 as much as 15%. Goldman Sachs economists told clients last month that government spending deadlines "will pose more risks this year than they will in a decade," with the "extremely thin" margin of Republican control divided as a complicating factor for the critical legislation. Pointing to Congress. In the House and a two-vote lead by Senate Democrats.
Federal government officially reaches debt limit, initiates 'extraordinary measures' to prevent default (Forbes)
Yellen warns, if the debt limit is not increased, the US may run out of cash by the beginning of June (Forbes)
Credit: www.forbes.com /