The US banking system has been going through a serious challenge in recent months. Failures of a few domestic banks, the global de-dollarization campaign, and the recent threat of the US defaulting on its debt took their toll on the banking sector. Fortunately, the grim scenario was averted as US legislators passed the last-minute deal on raising the debt ceiling. Therefore, US banks luckily escaped from the severe consequences of the default.
American lawmakers have the leverage to cancel a default at the legislative level. Oddly enough, even though the US is the most heavily indebted country with a $31.4-trillion gross federal debt, Congress is authorized to make an amendment to the valid legislation and prevent the government from running out of cash and even exert its influence on economic development.
The default might have entailed a catastrophe for American banks. Earlier, US Treasury Secretary Janet Yellen held a meeting with more than 20 leaders of domestic banks to discuss the emergency plan in case the debt ceiling deal is not approved. She also called on Congressional Republicans and Democrats to nail down the deal and defined it as an extremely urgent matter. She warned lawmakers about devastating repercussions for the US economy and businesses if they fail to increase the federal debt limit.
