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It’s devastating that two federal officials don’t raise U.S. debt caps on Monday, hours before Senate Republicans are set to raise borrowing limits and thwart legislation to stop government closures. Warned that it would bring about good results.
Federal Reserve Bank of New York Governor John Williams said the US central bank would not be able to mitigate the effects of potential defaults on government debt. Washington’s think tank, the Bipartisan Policy Center, estimated last week that the US government could default in mid-October if debt caps weren’t raised.
Williams warned reporters about the risks that investors would think “become very nervous” and “have to get out of things,” and said it could lead to “extreme reaction in the market.” ..
Williams told reporters that the current price of US Treasuries reflects investors’ belief that “coolerheads” dominate Congress and are therefore not necessarily “indicators of risk.” Told.
The Democratic-controlled House of Representatives passed the bill earlier this month in a party vote to avoid a government shutdown on October 1 and extend the US debt cap until December next year.
But all 50 Republicans in the Senate, which Democrats have the narrowest margins, are poised to reject the bill when Democratic Senate majority leader Chuck Schumer submits it on Monday night. Is in place. Given that the bill requires 60 votes to pass the Senate, it’s almost certain to fail.
At an event hosted by the National Association for Business Economics, Federal Reserve Board of Governors Rael Brainard also urged lawmakers to act on Monday. It did it before. You need to step up. It’s responsible. “
“Americans have had enough drama in the last two years,” she added.
Comments from Brainard and Williams follow last week’s Federal Reserve Board Chairman Jay Powell’s warning of “serious damage” to the economy and financial markets in the event of a US default. ..
“That’s not something we should think about,” Powell said. “No one should assume that the market and economy can be completely protected if the Fed or anyone else fails.”
Monday’s Senate vote is a week-long confrontation between Democrats asking the GOP to sign an increase in the Treasury’s borrowing limit and Republicans who have categorically refused to approve the bill and repeatedly accused it. Will come to mind. Joe Biden’s Reckless Public Expenditure Party.
Democrats are also struggling to resolve divisions within the party to pass Biden’s flagship $ 1.2 trillion infrastructure bill and a $ 3.5 trillion social investment package in the coming weeks.
House Democratic Chairman Nancy Pelosi will vote in favor of the infrastructure bill on Thursday, the same day that the federal government runs out of money.
Pelosi said on the weekend that he would not bring the infrastructure bill to the house floor until he was convinced that he had a vote to pass the infrastructure bill. The outlook was still uncertain on Monday as several progressive and moderate lawmakers raised issues with the legislative package.
Progressivists want a guarantee that the $ 3.5 trillion bill will not be washed away in the Senate, but moderates say large-scale social investment needs to be curtailed.
However, Biden made a bright tone at the White House on Monday, telling reporters that he was a “born optimist.”
“I think things will work, I think we’ll get it done,” Biden said.
When asked what was “at risk” to the presidency during this week’s parliamentary debate, the president replied, “Victory is at stake.”
The Republican Party, with the support of the Democratic Party, resolved to suspend debt restrictions three times under the Donald Trump administration.
But now, the opposition, led by Senate minority leader Mitch McConnell, has argued that the Democratic Party should avoid filibuster in the Senate. Increase borrowing limits to avoid government closure before the 12:01 am deadline on Friday.
US Treasury Secretary Janet Yellen said the inability to raise the federal borrowing limit would be a “catastrophe.”
However, the Senate Republicans haven’t blinked so far, claiming that there is no risk of disaster, as Democrats can use Senate procedures to raise debt limits and fund the federal government independently. .. Currently, the Democratic Party controls the Senate of Parliament 50-50, and Vice President Kamala Harris can vote for a tiebreaker.
Republicans are also trying to dismantle Biden’s legislative agenda in just over a year until the 2022 midterm elections, when both the House and Senate are in control.
The Federal Reserve Board warns of “extreme” market reactions unless debt caps are raised
Source link The Federal Reserve Board warns of “extreme” market reactions unless debt caps are raised