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“Wall Street “Top Dogs” Warn of “Seismic” Consequences in the Event of a US Default

Top executives from Wall Street, who have been providing advisory services to the US Department of the Treasury on debt market borrowings for the past 25 years, have expressed profound concerns regarding the unresolved issue of the United States debt ceiling. In a letter addressed to Janet Yellen, the Secretary of the Treasury, and published on the department’s official website, a group of 17 former and current leaders of the Treasury Borrowing Advisory Committee (TBAC) conveyed their unease over the mounting apprehension within financial markets regarding the potential occurrence of a debt default by the United States. This unsettling situation has already led to an escalation in the overall debt burden borne by each American taxpayer, amplifying the urgency for a swift resolution to the impasse.

For decades, these top-level managers from Wall Street have been intimately involved in guiding the US Treasury Department’s borrowing decisions, providing their expertise and insights to navigate the complexities of the debt market. Drawing from their extensive experience and knowledge, they have emphasized the critical importance of addressing the issue of the debt ceiling promptly and effectively.

The executives highlighted that financial markets, both domestically and globally, are increasingly growing concerned about the possibility of a US debt default. The potential consequences of such an event are viewed as seismic and could have far-reaching implications, impacting not only the US economy but also the stability of global financial systems. This heightened level of anxiety within the markets has already started to manifest itself, resulting in an augmented burden of debt for American taxpayers.

In their letter, the top managers urged the Treasury Secretary and the US government to take immediate action to resolve the impasse surrounding the debt ceiling. They emphasized the urgency of finding a solution that ensures the continued ability of the US government to honor its financial obligations without disruptions or defaults. The executives stressed the importance of maintaining the confidence of financial markets and preserving the United States’ reputation as a reliable borrower.

The gravity of the situation has prompted these influential figures to speak out, underscoring the need for decisive and proactive measures to address the impending risks associated with the unresolved debt ceiling issue. The collective expertise and insights of these top Wall Street executives serve as a stark reminder of the potential consequences that may arise if a resolution is not reached in a timely manner.

As the Treasury Department and policymakers grapple with this complex challenge, the concerns expressed by these esteemed financial leaders underscore the need for swift action and a collaborative approach to safeguarding the financial stability of the United States and the global economy as a whole.

“It is time to develop an alternative method to ensure budgetary responsibility, either by increasing the debt ceiling in line with approved appropriations or by completely eliminating the limit,” the letter quoted by Interfax states.

“The impasse in discussing the debt ceiling issue risks undermining the foundations of the American government bond market, as well as trust in the US government. Payment deferrals of interest or principal by the Treasury Department would be a seismic event not only for financial markets but also for the real economy,” the letter notes.

It is worth noting that earlier, the Secretary of the Treasury, to whom the letter was addressed, stated that the department she leads could exhaust its resources to service the national debt by the beginning of June.

Yesterday, a meeting took place between President Joe Biden and congressional leaders to discuss the prospect of raising the debt limit for the United States. In January, the US national debt reached the milestone of $31.5 trillion.

The meeting ended without a result, but both Biden and Republican leaders stated that default is not an option and that the US has always paid and will continue to pay its debts.

Republicans are willing to increase the debt ceiling by $1.5 trillion but at the same time cut spending by $4.8 trillion. Democrats, including the Biden administration, want to raise the ceiling without any conditions.

There are increasing concerns about the threats to the global economy in the event of an American default. However, it should be noted that there is no basis to believe that the US will not reach an agreement by June 1.

Such manipulations with the issue of the debt ceiling have been observed before and are repeated with alarming regularity. Regardless of whether the president is a Republican or a Democrat.

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