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The Federal Reserve has declared the U.S. government's debt of $36 trillion as the biggest risk to financial stability, pushing inflation and geopolitical tensions down the list.

This was part of a central bank survey conducted by staff at the New York Fed from August to October, which was included in its latest semiannual report on financial stability.

While the Fed has remained cautious about the banking sector, calling it "healthy and resilient," the rest of the system does not seem as robust. Hedge funds are maxing out their leverage to record levels, and households—especially those with low credit ratings—are falling behind on auto loans and credit cards.

The Fed stated that the delinquency rates in these areas are "above average," which further tightens the noose around the economy.