Bernanke: Fiddling on debt limit could end badly

Analysis & Opinion

• Banks, regulators should stop publicly bickering
• Fed gets a taste of painful exit strategies

By Pedro Nicolaci da Costa

WASHINGTON | Tue Jun 14, 2011 2:44pm EDT

(Reuters) - Federal Reserve Chairman Ben Bernanke warned on Tuesday that a failure to lift the government's $14.3 trillion debt ceiling risks a potentially disastrous loss of confidence in America's creditworthiness.
Bernanke said in the absence of a quick resolution to the battle over the debt limit, the United States could lose its prized AAA credit rating, while the dollar's special status as a reserve currency might be damaged.
"Even a short suspension of payments on principal or interest on the Treasury's debt obligations could cause severe disruptions in financial markets and the payments system," Bernanke said in remarks prepared for delivery at an event sponsored by the Committee for a Responsible Federal Budget.
Inaction could also "create fundamental doubts about the creditworthiness of the United States, and damage the special role of the dollar and Treasury securities in global markets in the long term," Bernanke added.