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.
Reuters
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 Miami Cubans Divided on New US Policy

While older, more conservative Cuban Americans have promoted anti-Castro political movement for years, younger generations say economically, it is time for change More

2014 Sees Dramatic Uptick in Boko Haram Abductions

Militants suspected in latest mass kidnapping of over 100 people in Gumsuri, Nigeria on Sunday More

Video Cuba Deal Is Major Victory for Pope

Role of Francis hailed throughout US, Latin America - though some Cuban-American Catholics have mixed feelings More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8143
JPY
USD
119.23
GBP
USD
0.6390
CAD
USD
1.1596
INR
USD
63.304

Rates may not be current.