Yellen warns of 'financial crisis and calamity'

(SOT-TREASURY SECRETARY JANET YELLEN)

"We are in the midst of a fragile, yet rapid recovery from the pandemic-induced recession."

Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen were back on Capitol Hill Tuesday.

America's two top financial and economic leaders were supposed to be there to update the Senate Banking Committee on the economic rebound and the federal spending, known as the CARES ACT, which fueled it, but the hearing quickly turned to the looming deadline for Congress to raise the nation's borrowing limit and what would happen if it doesn't.

(SOT-TREASURY SECRETARY JANET YELLEN)

"America would default for the first time in history. The full faith and credit of the United States would be impaired and our country would likely face a financial crisis and economic recession. As a result, we must address this issue to honor commitments made by this and prior Congresses, including those made to address the health and economic impact of the pandemic. It's necessary to avert a catastrophic event for our economy."

Yellen repeatedly tried to make clear that raising the debt limit was needed to pay the bills that were already accrued , and warned the Treasury will run out of ways to do so on October 18th. Republicans on the committee say by raising the debt limit now – it will only encourage Democrats to spend more – and have vowed to vote against raising the debt limit – breaking with long-standing bi-partisan tradition.

(SOT-TREASURY SECRETARY JANET YELLEN)

"This would be a manufactured crisis we had imposed on this country, which has been going through a very difficult period, is on the road to recovery. And it would be a self-inflicted wound of enormous proportions."

Powell stayed out of the discussion on the debt limit, but did remark on what he thought the services sector and the economy-at-large needed to keep the rebound going.

(SOT- FEDERAL RESERVE CHAIRMAN JEROME POWELL)

"In my view, the most important thing is to get control of the pandemic. That's what's keeping people out of sporting arenas and off of airplanes and out of restaurants and bars. And we saw that very clearly in the August payroll report where job creation in these industries had gone from very strong for several months to zero in August. So it's really all about at this point getting the Delta variant and really, frankly, getting vaccination and immunity up higher."

Both will be back on Thursday to testify before the House Financial Services Committee.

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