Jamie Dimon, CEO of JPMorgan Chase, has said the bank is holding weekly meetings to discuss the implications of a possible US default, which he called “potentially catastrophic.”
That bank’s so-called “war room” will begin holding daily meetings on May 21, then increase to three times a day if the deadlock over the debt limit continues, Dimon told Bloomberg TV in an interview Thursday.
“We have to be very careful about getting close to bankruptcy, which could cause financial panic if the debt ceiling is not raised by the end of the month,” he added.
“The closer you get, the more you panic,” Dimon said. “Markets will become volatile, maybe the stock market will fall, the treasury markets will have their own problems.”
“It’s very unfortunate, it takes a lot of time, hopefully it won’t happen, but it will affect contracts, securities, clearinghouses, clients,” added Dimon.
Jamie Dimon, CEO of JPMorgan Chase, has said the bank is holding weekly meetings to discuss the implications of a possible US default, which he called “potentially catastrophic.”
The United States faces a “significant risk” of defaulting on its debt obligations in the first two weeks of June without raising the debt ceiling, the Congressional Budget Office said Friday.
Similarly, Treasury Secretary Janet Yellen has estimated a possible default around June 1, underscoring the urgency of resolving a bitter deadlock between Republicans and Democrats over raising the country’s $31.4 trillion legal borrowing limit.
While Democrats have called for an unlimited increase in the debt limit, Republicans are demanding significant cuts for the next fiscal year before agreeing to raise the limit on the Treasury’s borrowing capacity.
Negotiations between White House officials and staff of Republicans and Democrats in Congress are continuing, but a meeting on Friday’s debt limit between President Joe Biden and top lawmakers was postponed until next week.
Republican House Speaker Kevin McCarthy said there had not yet been “enough progress for the leaders to get back together.” Staff-level talks are expected to continue throughout the weekend.
The approaching default deadline has already given the financial markets quite a fright. On Friday, the Dow Jones Industrial Average closed the session slightly lower after losing 414 points, or 1.23 percent, over the course of the week.
On Friday, the Dow Jones Industrial Average closed the session slightly lower after losing 414 points, or 1.23 percent, over the course of the week
Not only Wall Street is concerned. Sentiment among US consumers is falling, according to a preliminary survey from the University of Michigan on Friday.
That’s a concern, as strong consumer spending has been one of the pillars keeping an already slowing economy from sliding into recession with massive job losses.
Joanne Hsu, director of the Surveys of Consumer, pointed to the looming possibility of government default as a factor weighing on sentiment.
“If policymakers fail to resolve the debt ceiling crisis, these gloomy views on the economy will exacerbate the serious economic consequences of default,” she said in a statement.
The CBO’s report on Friday offered hope for more negotiating time, saying the Treasury could “probably” fund government operations through at least the end of July if available cash and extraordinary lending measures can last until June 15, when estimated quarterly tax payments are due. .
On June 30, the Treasury will gain access to $145 billion in new extraordinary lending measures by suspending investment in two pension and health funds for public employees.
Negotiations between White House officials and Republican and Democrat staff in Congress continue, but a meeting on Friday’s debt limit between President Joe Biden and top lawmakers was postponed until next week
“The extent to which the government will be able to fund the government’s ongoing operations will remain uncertain in May, even if the Treasury eventually runs out of money by early June,” the CBO said in a statement.
“That uncertainty exists because the timing and amount of revenues and expenses in the intervening weeks may differ from CBO’s projections,” the CBO said.
The Treasury reported a cash balance of $154.8 billion on Wednesday, and the CBO said it had about $41 billion in borrowing capacity as of April 30 under extraordinary measures.
The CBO said the Treasury will spend about $50 billion by mid-May to cover interest due on 10-year bonds and on longer-term bonds, with $10 billion to $16 billion in spending by the end of May.
On June 1, the government is likely to pay out about $25 billion in Social Security benefits and salaries to military personnel and civil servants.