Yellen: Inaction on Debt Ceiling Could Bring a Recession

The Treasury chief decries stalemate in Congress on spending authority.

Treasury Secretary Janet Yellen is warning Congress that failure to increase the federal debt limit could plunge the nation into a recession.

In remarks slated to be given to the Senate Banking Committee this morning, Yellen admonished lawmakers that the “full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession.”

Senate Republicans on Monday blocked a measure, which the House of Representatives has passed, that would suspend the US borrowing limit and also fund the government. Funding authorization expires at the end of the day on Thursday. The GOP senators argue that the two items should be separated. Without any action, Washington would run out of money by Oct. 18, Yellen said.

The Capitol Hill standoff is a large factor in today’s market sell-off. Tech stocks in particular have been hammered, with the Nasdaq Composite down by 2%.