News / Economy

Bank CEOs Warn of Consequences From US Shutdown, Default

Lloyd Blankfein, Chairman and CEO of The Goldman Sachs Group, and Brian Moynihan CEO of Bank of America, speak to the media after a meeting by the Financial Services Forum with U.S. President Barack Obama at the White House, Oct. 2, 2013.
Lloyd Blankfein, Chairman and CEO of The Goldman Sachs Group, and Brian Moynihan CEO of Bank of America, speak to the media after a meeting by the Financial Services Forum with U.S. President Barack Obama at the White House, Oct. 2, 2013.
Chief executives from major financial institutions met with President Barack Obama on Wednesday and warned of “adverse” consequences if government agencies remain closed and if lawmakers failed to raise the U.S. debt ceiling by mid-October.
What Does a U.S. Government Shutdown Mean?

  • Large parts of the federal government need to be funded each year to operate
  • If Congress cannot agree on how to fund them, those parts of the government shut down
  • During a shutdown, federal workers are separated into excepted and non-excepted employees
  • Excepted must continue to work, and will be paid when Congress funds the government again
  • Non-excepted are furloughed and not guaranteed to receive back-pay
  • Parts of the government dealing with national security and public safety and those with independent funding like the Postal Service continue to operate
  • Other parts shut down, including National Parks, the EPA and the processing of visa and passport applications
  • The last government shutdown lasted 21 days and ended on January 6, 1996
Congressional Republicans and the White House are in a stalemate over government funding, which has forced the first government shutdown in 17 years.
Republicans, seeking to stop Obama's signature health care act, have tied spending bills for the fiscal year that started Oct. 1 to defunding or delaying the law, a course rejected by the president and his fellow Democrats.
The two sides are also at odds about an Oct. 17 deadline to raise the U.S. borrowing limit.
Goldman Sachs chief executive Lloyd Blankfein, while stressing that the business leaders who met with Obama represented diverse political views, implicitly criticized Republicans for using their opposition to the healthcare law as a weapon that could lead to a U.S. default.
“You can litigate these policy issues. You can re-litigate these policy issues in a political forum, but they shouldn't use the threat of causing the U.S. to fail on its ... obligations to repay on its debt as a cudgel,” Blankfein said.
While the government closure has already had repercussions from frustrated tourists turned away from national parks to canceled stops on Obama's Asia trip, the deadline for raising the nation's debt limit poses a much graver risk.
If Congress fails to raise the $16.7 trillion borrowing cap, the United States would go into default, likely triggering financial market shockwaves around the world.
“There's no debate that the seriousness of the U.S. not paying its debts ... is the most serious thing we have, and we witnessed that in August '11 and you saw the ramifications: a slowdown in the economy,” said Brian Moynihan, chief executive of Bank of America.
The United States came close to default during a similar political crisis in 2011. That standoff prompted a first-ever downgrade of the United States' credit rating.
Conservative Republicans have signaled they will take the same tactic on the debt limit this year as they did on government funding by seeking to dismantle or put off the health care law. The president has refused to negotiate over raising the debt limit.
'No precedent'
Business leaders made clear the financial world wanted to avoid the risk of the government not paying its bills.
“There is precedent for a government shutdown. There's no precedent for default. We're the most important economy in the world. We're the reserve currency of the world,” said Blankfein.
Business leaders wanted Washington to understand “the long-term consequences of a shutdown ... certainly the consequences of a debt ceiling [not being raised], and we all agree that those are extremely adverse,” he said.
Michael Corbat of Citigroup, Jamie Dimon of JPMorgan Chase & Co, Robert Benmosche of AIG, James Gorman of Morgan Stanley, and John Stumpf of Wells Fargo , among others were scheduled to attend the session along with Vice President Joe Biden.
“I think both sides have a pretty good appreciation for what's at stake here,” said Citi's Corbat. He said the executives were “trying to encourage both sides to engage.”
Some engagement is scheduled for later on Wednesday, when Obama meets with the top leaders of Congress at the White House. Treasury Secretary Jack Lew would brief the leaders at the meeting on the impacts of the threat of default in 2011 and the economic imperative for Congress to act to raise the debt ceiling, White House spokesman Jay Carney said.

You May Like

Video Egyptian Journalists Call for Press Freedom

Despite release of al-Jazeera journalists and others, Egyptian Journalist Syndicate says some remain imprisoned More

Turkey Survey Indicates Traditional Distrusts, Shift to the West

Comprehensive public opinion survey also found a large majority of those interviewed distrust all countries other than country’s neighbor, Azerbaijan More

Pakistan Court Upholds Death Sentence in Blasphemy Killing

Highest court upholds sentence of Mumtaz Qadri convicted of 2011 killing a provincial governor for criticizing country’s controversial blasphemy law More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Making a Minti
October 07, 2015 4:17 AM
While apples, corn, and cranberries top the list of fall produce in the US, it’s also the time to harvest gum, candy, and toothpaste—or at least the oil that makes them minty fresh. Erika Celeste reports from South Bend, Indiana on the mint harvest.

Video Making a Mint

While apples, corn, and cranberries top the list of fall produce in the US, it’s also the time to harvest gum, candy, and toothpaste—or at least the oil that makes them minty fresh. Erika Celeste reports from South Bend, Indiana on the mint harvest.

Video Activists Decry Lagos Slum Demolition

Acting on a court order, authorities in Nigeria demolished a slum last month in the commercial capital, Lagos. But human rights activists say the order was illegal, and the community was razed to make way for a government housing project. Chris Stein has more from Lagos.

Video Self-Driving Cars Getting Closer

We are at the dawn of the robotic car age and should start getting used to seeing self-driving cars, at least on highways. Car and truck manufacturers are now running a tight race to see who will be the first to hit the street, while some taxicab companies are already planning to upgrade their fleets. VOA’s George Putic has more.

Video TPP Agreed, But Faces Stiff Opposition

President Barack Obama promoted the Trans-Pacific Partnership on Tuesday, one day after 12 Pacific Rim nations reached the free trade deal in Atlanta. The controversial pact that would involve about 40 percent of global trade still needs approval by lawmakers in respective countries. Zlatica Hoke reports Obama is facing strong opposition to the deal, including from members of his own party.

Video Clinton Seeks to Boost Image Before Upcoming Debate

The five announced Democratic party presidential contenders meet in their first debate next Tuesday in Las Vegas, Nevada. Former secretary of state Hillary Clinton continues to lead the Democratic field, but she is getting a stronger-than-expected challenge from Vermont Senator Bernie Sanders. VOA National correspondent Jim Malone has more from Washington.

Video Ukranian Artist Portrays Putin in an Unusual Way

As Russian President Vladimir Putin was addressing the United Nations in New York last month, he was also being featured in an art exhibition in Washington. It’s not a flattering exhibit. It’s done by a Ukrainian artist in a unique medium. And its creator says it’s not only a work of art - it’s a political statement. VOA’s Tetiana Kharchenko has more.

Video South Carolina Reels Under Worst-ever Flooding

South Carolina is reeling from the worst flooding in recorded history that forced residents from their homes and left thousands without drinking water and electricity. Parts of the state, including the capital, Columbia, received about 60 centimeters of rain in just a couple of days. Authorities warn that the end of rain does not mean the end of danger, as it will take days for the water to recede. Zlatica Hoke reports.

Video Russia’s Syria Involvement Raising Concerns in Europe

European nations are joining the United States in demanding that Russia stop targeting opposition groups other than the Islamic State militants as Russian warplanes continue to conduct raids in Syria. The demand came in a statement from Britain, France, Germany, Qatar, Saudi Arabia, Turkey and the United States Friday. VOA Europe correspondent Luis Ramirez reports.

Video Nano-tech Filter Cleans Dirty Water

Access to clean water is a problem for hundreds of millions of people around the world. Now, a scientist and chemical engineer in Tanzania (in East Africa) is working to change that by creating an innovative water filter that makes dirty water safe. VOA’s Deborah Block has the story.

Video Demand Rising for Organic Produce in Cambodia

In Cambodia, where rice has long been the main cash crop, farmers are being encouraged to turn to vegetables to satisfy the growing demand for locally produced organic farm products. Daniel de Carteret has more from Phnom Penh.

Video Botanists Grow Furniture, with Pruning Shears

For something a bit out of the ordinary to furnish your home, why not consider wooden chairs, crafted by nature, with a little help from some British botanists with an eye for design. VOA’s Jessica Berman reports.

VOA Blogs

World Currencies


Rates may not be current.