Mr Bernanke said that a failure to extend the debt limit could have 'extremely dire consequences' Federal Reserve chair Ben Bernanke has warned Congress not to use the national debt limit as a "bargaining chip". It would "cause interest rates on mortgages... to rise, rattle financial markets and hurt the economy".
In the worst case, it risked a Lehman-style meltdown, he told the Senate banking committee.
Congressional Republicans have threatened not to approve the legal limit on government debt if President Obama does not make deep spending cuts.
'Extremely dire consequences' The government is not allowed to exceed a ceiling on its total outstanding debts - currently $14.3tn (£8.8tn) - set by Congress.
But this does not prevent Congress from passing legislation that raises government spending and cuts taxation, implicitly requiring the federal government to run a deficit.
The US government is set to run up against the debt ceiling in a matter of days unless the Republican-controlled Congress passes legislation raising the limit.
However, John Boehner, the Republican leader of the House of Representatives, insists that Senate Democrats and the President must first agree to trillions of dollars of cuts in government spending.
The same Republicans forced through an extension to George W Bush-era tax cuts for top income earners when they took control of the House, significantly increasing the government's borrowing needs over the long term.
A failure to raise the limit would force the government to either break the limit or else default on payment obligations.
"It is a risky approach not to raise the debt limit in a reasonable time," said Mr Bernanke at the Senate committee hearing.
"The worst outcome would be one in which the financial system was again destabilised as we saw following Lehman, for example, which would of course have extremely dire consequences for the US economy."
Mr Bernanke was testifying at the committee about the US central bank's progress in implementing the Dodd-Frank financial regulation law passed in the wake of the crisis.
Some Republican members of Congress would like to see the Democrat-sponsored bill repealed.