"Such large and growing federal debt could have serious negative consequences, including restraining economic growth in the long term, giving policy makers less flexibility to respond to unexpected challenges, and eventually increasing the risk of a fiscal crisis"
- Douglas Elmendorf, Congressional Budget Office chief
The House of Representatives on Tuesday voted to lift the government's borrowing limit until March 2015, without any conditions. The legislation would eliminate any possibility of default on $17.2 trillion in debt, marking a final capitulation of Republicans and a victory from President Obama's administration. The vote comes after Republicans backed off their strategy of attempting to use the debt limit to force spending cuts or other concessions.
Also, Richmond Federal Reserve President Jeffrey Lacker urged new laws to tackle the problem of too-big-too-fail banks, calling it "the most critical issue facing our financial system", as well as ending Fed's emergency lending powers. Despite the fact that Wall Street reform legislation partially prevents a possibility of new bailouts, more legislation is necessary, while the Fed's role of "lender of last resort" should not include bailing out insolvent, large institutions, whose collapse is seen as a substantial risk to overall financial stability.
Meanwhile, Federal Reserve Chair Janel Yellen's second day of testimony to lawmakers scheduled for today is postponed due to a winter storm forecast. However, a new date has not been announced yet.
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