WASHINGTON — Treasury Secretary Janet Yellen said Friday that the USA will likely have enough reserves to push off a possible debt default until June 5.
“We now estimate that Treasury could have insufficient resources to satisfy the federal government’s obligations if Congress has not raised or suspended the debt limit by June 5,” Yellen wrote in a letter to House Speaker Kevin McCarthy.
The brand new date Friday provided some much needed respiration room for negotiations between the White House and congressional Republicans that seemed to be closing in on a compromise agreement Friday to boost the debt ceiling for 2 years.
The last time the so-called “X date” was updated was on May 1, when Yellen told Congress the USA had enough money available to satisfy its obligations until “early June, and potentially as early as June 1.”
Friday’s letter marked the primary time since Yellen began sending regular updates to Congress in January that the secretary didn’t caveat the date with a phrase like “as early as.”
As an alternative, Yellen explained that Treasury would make greater than “$130 billion of scheduled payments in the primary two days of June,” leaving the agency with “a particularly low level of resources.”
“Through the week of June 5, Treasury is scheduled to make an estimated $92 billion of payments and transfers,” Yellen continued, and “our projected resources could be inadequate to satisfy all of those obligations.”
To underscore just how low Treasury’s reserves had fallen, Yellen said the agency was forced to deploy an obscure measure on Thursday to maneuver $2 billion from a civil service retirement fund over to the federal government’s fundamental borrowing institution, the Federal Financing Bank.
The move was mandatory because “the extremely low level of remaining resources demands that I exhaust all available extraordinary measures to avoid being unable to satisfy all of the federal government’s commitments,” Yellen wrote.
Markets closed higher Friday, buoyed partially by optimism that there could be a deal passed by the House and Senate and signed by the president by June 1.
But as talks dragged on this week with little greater than vague claims of “progress” by those involved, optimism faded that deal could be reached by the tip of Friday.
Officials said Friday was widely seen because the last possible day to succeed in a deal and still have enough time to craft it into laws, pass it within the House after which pass it within the Senate before the previous “X-date” of June 1.
Yellen’s latest date got here amid growing concerns around the globe concerning the U.S. credit standing.
On Wednesday, the Fitch credit standing agency announced it had placed the USA’ triple-A standing on “rating watch negative.”
On Friday, in a preliminary International Monetary Fund annual assessment of the USA, officials wrote that “brinkmanship over the federal debt ceiling could create an extra, entirely avoidable systemic risk to each the U.S. and the worldwide economy.”
Should the USA technically default, even for just just a few days, it could drive up rates of interest and undermine confidence within the U.S. dollar. Economists note that America’s adversaries, and particularly Russia and China, are watching the present debt limit standoff with delight, secure within the knowledge that an erosion of trust within the U.S. dollar would accrue to their profit.
