Bankers from Wall Street warned about the “unthinkable” consequences of a US default
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Wall Street was warned about the “unthinkable” long-term consequences of a US default, writes Bloomberg.
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What the bankers say
Some of the most experienced traders argue that the US debt ceiling may have to be lifted forever. The US national debt ceiling of $31.4 trillion was reached in January of this year.
In a letter to Treasury Secretary Janet Yellen, current and former members of the US Treasury Borrowing Advisory Committee (TBAC) said that the problems caused by the increase in the national debt ceiling go beyond the markets and financial companies are forced to spend time preparing for a possible default.
The group of signatories of the letter includes 17 people, including top managers of Goldman Sachs Beth Hammock and Ashok Varadhan, as well as former chief operating officer of JPMorgan Chase Matt Zames. The committee has been advising the US Treasury on debt issues since 1998.
Read: Inflation in the USA dropped to a minimum since April 2021
“The short-term consequences of protracted negotiations on raising the US national debt ceiling are costly; the long-term consequences of default are unimaginable,” the letter says. The scale of the adverse consequences of protracted negotiations or default cannot be quantified.
The group also advocated raising the national debt limit “with all necessary haste” and for a solution that would help get rid of this problem forever.
“It is time to introduce an alternative method of ensuring fiscal responsibility, either by requiring an increase in borrowing limits simultaneously with the allocation of funds, or by completely canceling the debt limit,” TBAC participants wrote.
Beth Hammock, co-head of Goldman Sachs’ global finance division and longtime head of the advisory committee, said she sees a “real risk” to the U.S. dollar due to problems with the debt ceiling.
Source: Ministry of Finance
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