WASHINGTON: Treasury Secretary Janet Yellen is reaching out to US corporate and financial leaders to convey that a US default on its debt would have “catastrophic” consequences for the US and world economy, according to two individuals familiar with the situation.
The Treasury secretary is speaking with specific CEOs one-on-one to warn them about the “dangerous consequences of the present brinkmanship,” one of the sources claimed.
The sources declined to share details of Yellen’s recent phone calls or name the CEOs she spoke to or any other information about their talks, but one source claimed they included leaders of the banking industry and other sectors of the economy.
Though the sources did not specify her point of discussion, Biden administration officials have been talking to business leaders about persuading Republicans to extend the debt ceiling without conditions,.
In order to speak on ABC News’ ‘This Week’ on Sunday, the Treasury secretary postponed a trip to Japan for this week’s Group of Seven finance ministers conference. There, she warned that failure by Congress to increase the $31.4 trillion debt ceiling may result in a ‘constitutional catastrophe’.
Yellen made a direct allusion to Republican legislators’ insistence on linking a debt-ceiling rise to significant expenditure cutbacks that Democrats reject when she stated that discussions on the matter should not take place “with a gun to the head of the American people.”
President Joe Biden maintains that Congress must lift the debt ceiling, which represents already spent public funds, without conditions in accordance with the constitution.
To try to resolve the standoff, he will meet at the White House on Tuesday with House Speaker Kevin McCarthy of the Republican Party, Senate Minority Leader Mitch McConnell, and senior congressional Democrats.
Yellen informed legislators last week that, absent a raise in the federal debt ceiling, Treasury would probably not be able to cover all of the government’s expenses as of June 1.
Yellen and other economists and experts have frequently warned that a US debt default would lead to the loss of millions of jobs and increased family payments on credit cards, mortgages, and auto loans.
The United States has a strict cap on the amount it may borrow, unlike the majority of other affluent nations. The debt limit must occasionally be raised by politicians because the government spends more than it collects.
