Bernanke Warns GOP to Raise Debt Limit
Reuters reports:
Federal Reserve Chairman Ben Bernanke on Thursday issued a stern warning to Republican lawmakers that delays in raising the United States' $14.3 trillion debt limit could have "catastrophic" consequences.
"Beyond a certain point ... the United States would be forced into a position of defaulting on its debt. And the implications of that on our financial system, our fiscal policy and our economy would be catastrophic," he told the National Press Club.
Bernanke coupled his warning with a call for the Obama administration and Congress to put in place a credible plan to curb future budget deficits.
He also offered a moderately more optimistic assessment of the economy's prospects than in other recent remarks, although he made clear the recovery still needs support from the Fed.
Some Republican leaders intend to use the need to raise the statutory debt ceiling as leverage for spending cuts. The Obama administration has said the nation would likely hit the limit between early April and late May.
If Congress does not raise the limit in a timely way, the government could be forced to scale back operations. A failure to lift the limit could raise the specter of a first-ever U.S. debt default and push interest rates up sharply.
Financial markets have not yet shown any nervousness over the debt limit, which has typically been raised after political grumbling, and Bernanke said the chances of a default were "very remote."
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