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Yellen says U.S. may exhaust cash by Oct 18 barring debt ceiling rise

EconomySep 28, 2021 05:21PM ET
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2/2 © Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen testifies before the Senate Appropriations Subcommittee on Financial Services about the FY22 Treasury budget request on Capitol Hill, in Washington, DC, U.S., June 23, 2021. Shawn Thew/Pool via REUTERS 2/2

By David Lawder and Susan Heavey

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen told lawmakers on Tuesday the government could run out of cash by Oct. 18 unless Congress acts to lift the federal debt limit in advance of the Treasury Department exhausting efforts to preserve resources.

"At that point, we expect Treasury would be left with very limited resources that would be depleted quickly," Yellen told lawmakers during a Senate Banking Committee hearing, echoing comments she made in a letter to lawmakers.

"It is uncertain whether we could continue to meet all the nation’s commitments after that date," she said in the letter, one day after Senate Republicans rejected a measure to raise the nation's borrowing limit to pay for previously incurred government spending.

Yellen on Tuesday appeared along with Federal Reserve Chair Jerome Powell before the Senate Banking Committee to review the two agencies' actions to shield the economy from the coronavirus pandemic.

Asked repeatedly during the hearing about the approaching deadline for lifting the debt ceiling, Yellen said failing to do so would be a "disastrous" event that would trigger a "financial crisis and calamity."

Powell also urged Congress to raise the debt limit in time to avoid default.

The Treasury had already undertaken "extraordinary measures" to keep government funds flowing after the debt ceiling was reached over the summer. But those measures will run out in about 20 days, although the exact date could vary, Yellen said.

Yellen's warning was followed by a sell-off in some Treasury securities due to mature within the next month, with the yield on the 1-month Treasury bill rising to the highest level in months.

To now, investors have largely taken the view that the standoff in Congress over the matter will get resolved before the government reaches the threshold of default, although earlier in September investment bank Goldman Sachs (NYSE:GS) described the current standoff as "the riskiest debt-limit deadline in a decade."

In prepared testimony before the hearing, Yellen said the United States should return to full employment next year despite headwinds from the coronavirus Delta variant. The recovery from a COVID-19 pandemic-induced recession remains "fragile but rapid."

"While our economy continues to expand and recapture a substantial share of the jobs lost during 2020, significant challenges from the Delta variant continue to suppress the speed of the recovery and present substantial barriers to a vibrant economy," Yellen said.

"Still, I remain optimistic about the medium-term trajectory of our economy, and I expect we will return to full employment next year."

Yellen says U.S. may exhaust cash by Oct 18 barring debt ceiling rise
 

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Comments (8)
Catholic Man
CatholicMan Sep 28, 2021 10:27PM ET
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democrats, you won’t have a corrupt government to shield you anymore.
Catholic Man
CatholicMan Sep 28, 2021 10:25PM ET
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Less government means happier people.
Connecticut Yankee
A_Jaundiced_Eye Sep 28, 2021 6:30PM ET
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The Delta variant is the best thing that ever happened to this Administration.  Nothing they do is working, so everything is the Delta variant's fault. Expect to hear "Delta variant" a lot when they have to go before the voters next November.
ben sc
ben sc Sep 28, 2021 5:49PM ET
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would be the best thing to happen to Washington.
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 28, 2021 5:29PM ET
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Yellen must first convince Kamala Harris to play the villian of the decade.
Mark Manley
Mark Manley Sep 28, 2021 5:24PM ET
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Yeah, Karen, we know. You and pres Joey put down your ice cream and stop laughing about all of the trouble you've caused, and do something about it
David JC
David JC Sep 28, 2021 4:25PM ET
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Peddling more fear...blah...blah...blah
Olga Haldemann
Olga Haldemann Sep 28, 2021 1:29PM ET
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Look, finally I see a logic exsplenation of raise in treasury yield. It is because of loosing faith in American debt. Previous financial analitics, including this Jerom Powell of yours, said: "investors are pricing Inn expectations of high inflation". And I was sitting wondering how would that raise treasury yields without intervention of FED.
 
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