Yellen says a U.S. default could cause global financial crisis, CNN reports

By Andrea Shalal and Kanishka Singh

DAKAR/WASHINGTON Jan 20 (Reuters) – U.S. Treasury
Secretary Janet Yellen said on Friday that a potential U.S.
default could cause a global financial crisis and undermine the
role of the dollar as a reserve currency.

The U.S. government hit its $31.4 trillion borrowing limit
on Thursday, a figure that reflects money already spent by the
government. Yellen has informed congressional leaders that her
department had begun using extraordinary cash management
measures that could stave off default until June 5.

“It (default) could cause a global financial crisis. It
would certainly undermine the role of the dollar as a reserve
currency that is used in transactions all over the world,”
Yellen said in an interview with CNN, adding that in such a
scenario many people would lose their jobs and see their
borrowing costs rise.

The White House is refusing to negotiate with hardline
Republicans on raising the debt ceiling because it believes
enough of them will eventually back off their demands, as a
growing chorus of investors, business groups and moderate
conservatives warn of the dangers of edging towards a default.
Republicans in the U.S. House of Representatives want cuts to
some government programs.

Yellen said the debt ceiling was for spending that was
already authorized by Congress and did not seek any additional
expenditure.

“So it’s not about seeking the right to engage in
additional spending. It is simply about paying bills Congress
has already authorized,” she told CNN. “This is something you
can’t negotiate over or bargain about.”

Yellen also discussed her recent meeting with Chinese
Vice Premier Liu He and said that China and the United States
should continue regular communication and seek prospects for
cooperation on matters of global importance like climate change.

“We discussed our cooperation and commitment to work
together to address global challenges,” she said.

(Reporting by Andrea Shalal and Kanishka Singh; editing by
Caitlin Webber, Diane Craft and Paul Simao)