US Treasury Secretary Janet Yellen stated that the debt limit should be increased in order to avoid economic disaster, and stated that there is no good option other than increasing the limit of Congress for the solution of the debt limit dilemma.
In an interview with ABC News, Yellen made evaluations on the economic agenda.
Pointing out that the US may face a cash crisis around the beginning of June, Yellen said that there is a lot of uncertainty and that she plans to inform the Congress as she obtains new information.
Yellen stated that they have been implementing extraordinary measures for the last few months, stating that their ability to implement these measures has been exhausted and that the country will begin to consume its cash.
"Negotiations should not be done by putting a gun to the head of the American people"
Pointing out that the US will not be able to pay its "bills" if Congress does not increase the debt limit, Yellen said, "We need to increase the debt limit to avoid economic disaster."
Yellen warned that if the debt limit is not increased, the US will not be able to make its payments due for the first time in its history.
Stating that US President Joe Biden invited Congressional leaders to the White House and wanted to create a process in which budget spending priorities and levels were negotiated, Yellen said, "However, these negotiations should not be done by putting a gun to the head of the American people."
Yellen noted that "there is no good option" other than Congress increasing the debt limit.
"I trust the overall strength of the banking system"
Referring to the developments in the banking sector, Yellen said, "I believe that our banking system has strong capital levels and liquidity access."
Reminding that they have taken decisive steps to ensure that the distress in a few banks does not spread, Yellen emphasised that they are ready to use the tools they have used before again if necessary.
Yellen stated that banks have access to liquidity and have good capital and said, "I am confident in the overall strength of the banking system."
Debt limit impasse
The US federal government has reached its debt limit of $31.4 trillion, which could lead to default.
The debt limit or debt ceiling means "the upper limit of the amount of money the US government can borrow to pay its debts".
Republicans, who hold the majority in the House of Representatives, are in favour of significant spending cuts in debt limit negotiations. Democrats, on the other hand, insist on increasing the debt limit and reject Republicans' proposals to cut certain spending.
There is concern that the debt limit issue, which has become a stalemate between Democrats and Republicans, will shake the markets. As recession expectations increase in the US, the two parties' showdown over the debt limit carries more risk than ever.
Biden to discuss debt limit with Congressional leaders on 9 May
US House of Representatives Speaker Kevin McCarthy had submitted a bill in April to increase the debt limit by $ 1.5 trillion.
The US House of Representatives approved the bill submitted by the Republicans, which envisaged increasing the debt limit and cuts in public spending, at the end of April.
The bill, which had no chance of passing the Senate controlled by the Democrats, was seen as a step for Republicans to start negotiations with President Biden on the debt limit.
Biden is expected to meet with House of Representatives Speaker McCarthy, Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell at the White House on 9 May to start negotiations on the debt limit.
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