“I urge Congress to act to increase the statutory debt limit as soon as possible,” U.S. Treasury Secretary Timothy Geithner told Congress in a public letter.
Mr. Geithner believes a failure to act would be disastrous for the U.S. economy.
“A default on Treasury debt could lead to concerns about the solvency of the investment funds and financial institutions that hold Treasury securities in their portfolios, which could cause a run on money market mutual funds and the broader financial system – similar to what happened in the wake of the collapse of Lehman Brothers.”
Skeptics argue that a failure to raise the debt ceiling would not significantly harm the economy.
On Monday, Mr. Geithner said he would suspend investments in two government retirement funds, which will provide nearly $147 billion in additional borrowing capacity.
“Federal retirees and employees will be unaffected by these actions,” he said.
