FirstFT: US Treasury risks running out of cash


World updates

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Janet Yellen has warned that the US Treasury risks running out of cash next month unless Congress increases its borrowing limit, as Joe Biden’s administration grows increasingly worried about a possible debt default.

In a letter to congressional leaders yesterday, the Treasury secretary said she could not offer “a specific estimate” of when it would run out of cash, but the “most likely outcome” was that its coffers would be “exhausted” during October.

“A delay that calls into question the federal government’s ability to meet all its obligations would likely cause irreparable damage to the US economy and global financial markets”, Yellen added.

The mounting risk of a US sovereign debt crisis as early as next month complicates Biden’s efforts to pass his multitrillion-dollar economic agenda through Congress in the coming weeks.

Increasing the US debt limit used to be a routine affair for Congress, allowing the Treasury to pay the bills for spending already approved by lawmakers. But Republican lawmakers have recently resisted raising it when the White House is controlled by Democrats, often demanding conditions that have triggered impasses on Capitol Hill and occasionally bringing the US to the brink of default.

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Five more stories in the news

1. Goldman names ex-McKinsey boss to top Asia role Goldman Sachs has hired ousted-McKinsey executive Kevin Sneader to serve as the bank’s co-president in Asia-Pacific, months after he failed to win re-election at the global consulting firm.

2. Theranos founder’s trial begins Elizabeth Holmes’s failure to make her blood-testing technology start-up Theranos a viable business was not a crime, her lawyers told a federal jury yesterday, at the beginning of a closely watched trial that will scrutinise her mental state and Silicon Valley’s promotional culture.

3. Sanae Takaichi outlines bid to be Japan’s first female PM The hardline nationalist with outspoken views on national security has entered the contest to succeed Yoshihide Suga. Takaichi, who would be the country’s first female leader, has been endorsed by Suga’s predecessor Shinzo Abe. 

4. SEC threatens to sue Coinbase over lending product The US Securities and Exchange Commission has warned that it will sue Coinbase if it launches a new digital asset lending product, and also issued subpoenas to the cryptocurrency trading platform to provide it with more information, according to executives.

5. PayPal to acquire buy now, pay later provider Paidy The US online payments company, has agreed to acquire Paidy, a Tokyo-based buy now, pay later group, for ¥300bn ($2.7bn) in the latest shake-up in the industry. For the latest industry news, sign up for our fintech newsletter here.

Coronavirus digest

  • US economic growth “downshifted slightly” between June and July as the more contagious Delta variant and labour supply shortages hampered business activity, the Federal Reserve reported yesterday.

  • India’s beauty salons, already battered by the country’s devastating second Covid-19 wave, are struggling to battle the rise of haircut delivery services.

  • Pfizer’s top scientist dismissed criticism that the company is pushing the widespread administration of Covid-19 booster shots too aggressively.

  • Covax has slashed its forecasts for Covid-19 vaccine deliveries to the developing world by about 25 per cent this year.

  • Boris Johnson shrugged off a Conservative rebellion, winning a comfortable majority for his plan to raise taxes by £12bn annually to tackle a crisis in the NHS and social care.

Follow our live coverage and sign up to our Coronavirus Business Update for a regular briefing on how the pandemic is affecting the global economy.

The day ahead

BRICS annual summit Indian prime minister Narendra Modi will chair the virtual gathering of the five major emerging economies today, which is expected to focus on Afghanistan. (Hindustan Times)

Jacob Zuma’s trial resumes in South Africa The former president’s corruption trial will resume today after Zuma was released early from prison last week on medical parole.

European Central Bank meeting When policymakers meet today, investors expect the central bank to announce a slowdown in the pace of bond purchases in response to a recent improvement in the economic outlook and a drop in financing costs for governments, businesses and households.

Wm Morrison earnings The British supermarket group, which has been the subject of a bidding war between US private equity firms, will report its interim results today.

What else we’re reading

China’s tough gaming curbs The risk of addiction, overspending and overindulgence has led to video games being dubbed a “poison”, a “drug” and “spiritual opium” by state-controlled newspapers. But last month Beijing imposed the world’s strictest limits on such games, reflecting increasing concerns about the reach of Chinese tech giants.

Living in the shadow of 9/11 When the Twin Towers fell on September 11 2001, Brendan Greeley ran to survive. He was 26 years old then. He is 46 now. This is his story.

“I told myself that what happened mattered less to me with each passing year. Then last month, with everyone else in the house asleep, I began to think about details.”

Brendan Greeley
Brendan Greeley: ‘I sat alone in my basement and wept, heaving, uncontrollably, in waves for about an hour’ © Shonagh Rae

Libya’s neighbours still feel the death of Muammer Gaddafi Libya had long been an entrepôt for migrants heading north. But after the 2011 revolution which toppled the dictator, their numbers soared, with stories of brutality and abuse common.

‘Diesel vs doughnuts’ A search for lower-carbon motor fuel is pitting food companies against the energy industry over tightening supplies of vegetable oil. “We support renewable fuels and the green agenda, but soyabean oil [prices] have tripled. Our members are worried that they may not be able to buy any oil,” said chief executive of the American Bakers Association.

El Salvador’s bet on bitcoin adds to investors’ political jitters The nation’s bitcoin gambit has heaped fresh pressure on its debt market after investors began selling its bonds earlier this year on rising concerns about the government of President Nayib Bukele. Was El Salvador right to adopt bitcoin as legal tender? Vote in our poll.

Food and drink

The gourmet-coffee scene in Hong Kong may be relatively young, but it has already crafted its own distinct, delicious identity — one that is equal parts creativity, local character and cool speciality brews. Primrose Riordan shares five of the city’s top coffee shops.

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