US Fed, Treasury huddle on debt crisis

Federal Reserve Chairman Ben Bernanke © AFP Mandel Ngan

AFP

WASHINGTON (AFP) – The head of the US Federal Reserve, one of his top lieutenants and the treasury secretary met Friday to study options as politicians remained stalemated on raising the country’s debt ceiling.

Central bank chairman Ben Bernanke; William Dudley, the head of the Fed’s key New York branch; and Treasury Secretary Timothy Geithner huddled in Washington as the country was 11 days from possibly being forced to default on its debt, the Treasury said.

“While we remain confident that Congress will raise the debt ceiling soon, officials from the Treasury, Federal Reserve Board and the New York Fed met today to discuss the implications for the US economy if Congress fails to act,” the Treasury said in a terse statement.

If the $14.3 trillion borrowing cap set by Congress is not raised by August 2, the government says, the country’s spending commitments will surpass its cash inflow and it will have to begin slashing spending.

While normal government spending could be the first thing hit, there are fears that Washington could be forced to renege on debt payments — an act which economists say could be disastrous for the US and global economy.

On Friday President Barack Obama stressed that “defaulting is not an option” but statements from numerous politicians made clear that a settlement of their battle over the debt ceiling and long-term deficit cutting remains distant.

© AFP — Published at Activist Post with license