A group of the largest US banks and fund managers stepped up the pressure on Congress and the Obama administration to reach a deal to increase the country’s debt limit, saying that even a short default could be devastating for the financial markets and economy.The warning over the debt limit is the strongest yet to come from Wall Street, highlighting growing nervousness among investors about the US political system’s ability to forge a consensus on fiscal policy.
The most pressing budgetary issue confronting Congress and the Obama administration is the need to raise the US debt ceiling, which stands at $14,300 billion.
That threshold will be reached by May 16 and the Treasury department has said that in the absence of congressional action, the world’s largest economy could default by early July.
Although such a scenario is still likely to be avoided, the looming deadline is stoking concerns within the financial industry.
“Any delay in making an interest or principal payment by Treasury even for a very short period of time would put the US Treasury and overall financial markets in uncharted territory and could trigger another catastrophic financial crisis,” said Matthew Zames, a JPMorgan executive, in a letter to Tim Geithner, the Treasury secretary, this week. (read more)
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