Two former Treasury secretaries who served in Republican administrations reportedly attempted to intervene in the long-simmering standoff over the debt limit, meeting with current Treasury Secretary Janet Yellen and Senate Minority Leader Mitch McConnell (R-KY) in recent weeks in an attempt to find some kind of compromise.
According to The Washington Post’s Jeff Stein Wednesday, the talks involving the Bush administration’s Henry Paulson and the Trump administration’s Steven Mnuchin did not produce any breakthroughs, and the threat of default on the country’s payment obligations continues to hang over the U.S. economy.
After his meeting with McConnell, Paulson reportedly told the Biden administration that the Kentucky Republican is not bluffing when he says Republicans will not support any efforts to raise the debt ceiling, and that Democrats must handle the debt limit on their own.
Mnuchin reportedly came to the same conclusion after speaking with McConnell.
“The backchanneling by Mnuchin and Paulson — who had previously worked together at Goldman Sachs — reflects the widespread alarm among economists and U.S. business interests about the consequences of an unprecedented default on the federal debt,” Stein writes.
A letter to Congress: In another sign of the growing alarm over the failure to resolve the looming crisis, six former Treasury secretaries sent a joint letter to Congressional leaders Wednesday urging lawmakers to act quickly to raise or suspend the debt ceiling
The letter from former Treasury Secretaries Paulson, Timothy Geithner, Lawrence Summers, Jack Lew, Robert Rubin and Michael Blumenthal warned that the country was running the risk of “serious economic and national security harm” if Congress fails to act swiftly. (As Reuters noted, the letter’s signatories did not include former Republican Treasury Secretaries Mnuchin, John Snow, Nicholas Brady or James Baker.)
“Even a short-lived default could threaten economic growth,” the former Treasury secretaries warned. “It creates the risk of roiling markets, and of sapping economic confidence, and it would prevent Americans from receiving vital services. It would be very damaging to undermine trust in the full faith and credit of the United States, and this damage would be hard to repair."
Yellen appeals to Wall Street: Treasury Secretary Yellen called the leaders of major financial firms in recent days as part of an effort to pressure Republicans to work with Democrats on a bipartisan solution to the debt ceiling crisis, Bloomberg’s Joe Light and Hannah Levitt report.
The executives contacted by Yellen include Jamie Dimon of JPMorgan Chase, Jane Fraser of Citigroup, Charlie Scharf of Wells Fargo and Brian Moynihan of Bank of America. Yellen reportedly asked them to speak out publicly on the issue.
“The calls are the latest sign of mounting pressure on the U.S. government to avert a potential crisis if it’s no longer able to borrow money to pay its bills,” Light and Levitt say. “Yellen has said the Treasury could exhaust its capacity to pay U.S. obligations sometime in October.”