Fed's Fisher decries U.S. flirtation with default

Texas Monthly magazine brings Dallas Federal Reserve Bank President Richard Fisher to SMU's campus, talks about the government shutdown, debt default and the economy.

By Jana J. Pruet

DALLAS (Reuters) - A U.S. central banker known for his criticism of Washington politics warned on Monday that the standoff in the U.S. Congress that has shut down the federal government could drive the country to the edge of defaulting on its sovereign debt.

The United States will run dangerously low on cash if lawmakers do not raise the federal borrowing cap by October 17, and a default could follow within a week.

"I deeply hope and I don't think we'll default, but it will come down to the wire," Dallas Federal Reserve Bank President Richard Fisher said in a forum at Southern Methodist University in Texas. "It's an embarrassment for my country."

The federal government shut down most of its operations and idled all but its most essential workers on October 1 after congressional Republicans made defunding or delaying President Barack Obama's signature healthcare law a condition of approving a budget for this fiscal year.

Congressional Republicans have insisted on similar concessions for raising the $16.7 trillion debt limit.

A previous confrontation over the debt ceiling in August 2011 ended with an 11th-hour agreement under pressure from shaken markets and warnings of an economic catastrophe if there was a default....