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Yellen Says US Debt Ceiling Drama ‘Cannot Be Normalized’ as Way of Doing Business

© AP Photo / Patrick SemanskyThis June 6, 2019, photo shows the U.S. Treasury Department building at dusk in Washington.
This June 6, 2019, photo shows the U.S. Treasury Department building at dusk in Washington. - Sputnik International, 1920, 13.06.2023
WASHINGTON (Sputnik) - The United States came close to receiving a negative rating as the Biden administration wrangled with rival Republicans to raise the nation’s debt ceiling and this cannot become a way of doing things in Washington, Treasury Secretary Janet Yellen said on Tuesday.
"I am relieved that, with the President’s leadership, Congress took action to address the debt limit in time," Yellen said. "[T]he United States once again came dangerously close to the line. This cannot be normalized as the way we do business in Washington."

On May 27, US House Speaker Kevin McCarthy and President Joe Biden reached a deal to increase the nation’s $34.1 trillion debt ceiling in time for the US government to pay for its obligations and avoid default. However, Fitch Ratings imposed a negative watch on the United States’ triple-A sovereign rating after the debt deal was passed by Congress and signed by Biden.

Yellen noted that this was the second time in more than a decade that "Congress went right up to the wire in failing to raise the debt ceiling [quickly enough]," earning a negative credit watch from another rating agency, Standard & Poor's, in 2011.
The US Treasury Department building is seen in Washington, DC, January 19, 2023, following an announcement by the US Treasury that it had begun taking measures Thursday to prevent a default on government debt, as Congress heads towards a high-stakes clash between Democrats and Republicans over raising the borrowing limit - Sputnik International, 1920, 04.06.2023
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"We are a nation that keeps our word and pays our bills," she said. "We should never give anyone any reason to think otherwise. Waiting until the last minute to do so hurts our global leadership and credibility on the world stage."
Yellen pointed out that the United States was a creditor fully deserving of its triple-A debt rating and losing it would risk the well-being of US households, resulting in long-lasting increases in their borrowing costs and other catastrophic consequences for the economy.

US Needs Greater Stake in IMF, International Financial Institutions

The United States needs to have a higher stake in the leadership of the International Monetary Fund (IMF) and in other international financial institutions to ensure adequate investments in the global economy, particularly in poorer countries, Treasury Secretary Janet Yellen said.
"The United States is not a passive shareholder. We actively shape the priorities of these institutions - as a leading shareholder in nearly all of them," Yellen told the US House Financial Services Committee. "Looking ahead, the Biden Administration seeks to bolster US leadership in these institutions."
Yellen said the United States seeks to renew its participation in the IMF’s "New Arrangements to Borrow," which has served as a critical backstop to IMF resources.
"We also seek authorization to lend to two key IMF trust funds: the Poverty Reduction and Growth Trust, and the Resilience and Sustainability Trust. These actions will help the IMF address economic crises, with a particular emphasis on supporting vulnerable developing countries amid heightened risks," she said.
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The treasury secretary pointed out that the Biden administration aims to boost US involvement in the International Development Bank and the African Development Fund as well.
"These investments will bolster our engagement in these regions at a time of geopolitical competition," Yellen said.
In addition, the United States seeks to help international financial institutions achieve greater governance, accountability and debt sustainability, Yellen said.

US involvement with such institutions serves as an important counterweight to nontransparent, unsustainable lending from others like China, she said.

"As an example, the multilateral development banks are a leading source of financing to close the infrastructure gap in developing countries," Yellen said.
The United States has already introduced reforms to stretch the World Bank’s balance sheet to unlock as much as $50 billion in additional lending capacity over the next decade, she added.
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