Obama warns of 2nd financial crisis

Congress must raise the American national debt ceiling or risk causing another global financial crisis, says U.S. President Barack Obama.

In an interview Tuesday with NBC's Today show, Obama said "the full faith and credit of the United States is the underpinning not only of our way of life, it's also the underpinning of a global financial system. We could actually have a reprise of a financial crisis, if we play this too close to the line. So we're going be working hard over the next month," he said.

But Obama also expressed confidence that Republican leaders want to avoid such a situation and said he expected lawmakers will reach agreement on how to increase the debt limit "in a sensible way."

The government has said it will exceed its $14.3-trillion debt ceiling on Aug. 2.

Later in the day, the chairman of the U.S. Federal Reserve, Ben Bernanke, urged Republicans to support a vote to raise the ceiling. He said threatening to block the increase to gain deeper cuts in federal spending could backfire and worsen the economy.

Bernanke, in a speech in Washington, renewed warnings that even a short delay in making payments on the nation's debt would cause severe disruptions in financial markets, damage the dollar and raise serious doubts about the nation's creditworthiness.

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Source: CBC News