By Keith Griffith for Dailymail.com and The Wire
22:08 12 May 2023, Updated 22:31 12 May 2023
- Dimon says JPMorgan has a ‘war room’ to handle a potential US debt default.
- He warned that a default could ‘bring disaster’ to financial markets
- If Congress does not raise the debt ceiling, the US faces the risk of default.
Jamie Dimon, chief executive of JPMorgan Chase, said the bank was calling weekly meetings to discuss the implications of the US default, which it said was ‘potentially catastrophic’.
Daily meetings of that bank’s so-called ‘war room’ will begin on May 21, then increase to three times a day if the dispute over the debt limit continues, Dimon told Bloomberg TV in an interview on Thursday.
“We have to be very cautious about approaching a default, which could trigger a financial shock if the debt ceiling is not lifted by the end of the month,” he added.
‘The closer you get to him, the more panic you get,’ said Damon. “Markets will be volatile. Maybe the stock market will go down. Treasury markets will have their own problems.”
“It’s unfortunate, it’s time-consuming, we hope it doesn’t happen, but it affects contracts, warranties, homes and customers,” Dimon added.
The US faces a ‘significant risk’ of defaulting on debt obligations in the first two weeks of June without a debt ceiling increase, the Congressional Budget Office said on Friday.
Likewise, Treasury Secretary Janet Yellen has predicted it will happen around June 1, signaling the need to resolve a bitter dispute between Republicans and Democrats over raising the nation’s $31.4 trillion statutory borrowing limit.
While Democrats have called for an unpaid increase to the debt limit, Republicans will require significant spending cuts for the coming fiscal year before agreeing to raise the Treasury’s borrowing limit.
Negotiations between White House officials and the staff of congressional Republicans and Democrats continued, but Friday’s debt ceiling meeting 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 to bring the leaders back together’. Labor talks are expected to continue through the weekend.
The looming default deadline has already sent jitters through financial markets. On Friday, the Dow Jones Industrial Average closed slightly lower on the session after losing 414 points, or 1.23 percent, on the week.
It’s not just Wall Street that’s concerned. Sentiment among American consumers is falling, according to a preliminary study by the University of Michigan on Friday.
That’s worrisome, because strong consumer spending is one of the pillars keeping an already slowing economy from sliding into recession with massive job losses.
Joanne Hsu, director of consumer research, pointed out that the possibility of a government deficit is looming due to sentiment.
If policymakers fail to address the debt ceiling crisis, these pessimistic views on the economy will exacerbate the dire economic consequences of the deficit.
A CBO report on Friday dashed hopes for more negotiating time, saying the Treasury could fund government operations at least until the end of July if monetary and extraordinary borrowing measures remain in place until June 15, when quarterly estimated tax payments are completed.
On June 30, the Treasury could find $145 billion in new extraordinary borrowing measures by freezing investments in two state employee pension and health funds.
“The government will not be sure until May how much funding it will be able to provide for operations, even if the Treasury runs out of funds in early June,” CBO said in a statement.
‘That uncertainty arises because the timing and amount of revenue collection and spending in the intervening weeks may differ from CBO’s projections,’ CBO said.
The Treasury reported a cash balance of $154.8 billion as of Wednesday, and the CBO said it could borrow about $41 billion through April 30 through extraordinary measures.
The CBO said in mid-May that the Treasury would spend about $50 billion to cover interest on 10-year notes and long-term bonds, up from $10 billion to $16 billion at the end of May.
On June 1, the government will pay about $25 billion in Social Security payments and pay and benefits to military personnel, civil service workers, and more.
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