Fed has 'no magic wand' in default

The Federal Reserve has no magic wand to overcome the consequences of a US default on its debt, a senior Fed official said Thursday. With politicians still deadlocked over a plan to raise the country's borrowing ceiling before the make-or-break date of August 2, the head of the central bank's San Francisco regional branch, John Williams, stressed the urgent need to break the impasse.
"Even as the nation must come to terms with its fiscal problems, a federal default must be avoided," he said in a speech in Salt Lake City. "Make no mistake - the Federal Reserve doesn't have a magic wand that will allow the economy to get through a crisis of this magnitude unscathed." Williams highlighted the core problem of the crisis that Republicans and Democrats are battling over, how to address the country's chronic massive budget shortfalls.