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WASHINGTON (Reuters);Chairman of the Federal Reserve / Fed (Central Bank) Ben S. U.S.Bernanke warned members of Congress about the use of federal debt limit as a "bargaining tool" in discussions about the budget,
saying that it could create market instability and disrupt the economy.
"In my opinion, use the debt limit issue as a bargaining tool is quite a risk," Bernanke said in testimony before the Senate Banking Committee in Washington, Friday. Failure to increase the debt limit would be "at least" lead to "higher interest rates, which obviously will worsen our deficit and hurt all borrowers in the economy."
Various comments by Bernanke voiced warnings this year about the possibility of very damaging if it continues growing investor concerns that the U.S. will fail to pay its debts.
Finance Minister Timothy Geithner said policy makers must raise the debt ceiling of $ 14.3 trillion before August 2 or at risk of default. Meanwhile, House Speaker John Boehner (Republican from Ohio) said any increase must be accompanied by "significant spending reductions and reforms to reduce debt."
Study Commission of the Republic to circulate a letter asking Boehner supports a plan that would reduce the federal deficit up to half a year in return for approval for the increase in debt limit by law. The move will reduce the budget to about $ 380 billion in fiscal year 2012.
In the hearing, Bernanke (57) said the lawmakers must have "reason to note" that the exemption for small lenders from the U.S. debit card fee restrictions would not work and will only lead to bank failures.
Exceptions for Small Lenders
"I can not confirm, but I think there is good reason to worry about it," Bernanke said responding to questions in the hearings. If an exception that does not work, "it will affect the income of small debit card issuer, and it can make small banks losing money or even a failure," he said.
Determination of Dodd-Frank (Dodd-Frank Act) requires the Fed to limit debit card fees charged to merchants, but released him for the card issuer with assets of less than $ 10 billion. The central bank has proposed restrictions on the transaction fee of 12 cents, to replace a formula to average 1.14% of the purchase price.
Community banks and the union says the card issuer, an exception it will not work and could make them less competitive card. They opposed the Fed's plan along with most major lenders, including Bank of America Corp.. and JPMorgan Chase & Co.., which will lose more than $ 12 billion in annual revenue if the restriction was applied.
The decision makers in the House and Senate have introduced legislation to suspend the rules. Senator Jon Tester (Democrat from Montana) proposed the suspension of the law for two years and require further research.
Fed trying to resolve the issue through monetary policy with the aim of lowering unemployment rates, Bernanke said in a hearing. (AP / sy.a)source: analisadaily.com
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