JP Morgan CEO says debt default could be catastrophic
With a debt ceiling agreement between the White House and congressional Republicans still proving elusive, JPMorgan Chase CEO Jamie Dimon warned on Thursday that alarm within the markets is growing and that a default, if allowed to occur, would be “potentially catastrophic,” as CNBC reports.
Dimon's remarks came in a televised interview with Bloomberg, and they underscore the growing pressure for a debt limit deal to be reached before the Treasury Department's June 1 projected default date.
Dimon's Dire Predictions
Giving voice to the concerns of many in business and government regarding a possible failure to either raise or suspend the debt limit, Dimon declared that the markets are certain to begin evincing a worrisome reaction as long as the current impasse persists.
“The closer you get to it, you will have panic,” Dimon said, referencing what he believes is inevitable volatility in the stock market.
Dimon continued, “If it gets to that panic point, people have to react, we've seen that before.”
Cautioning against such a reaction, however, Dimon stated that panic “is a really bad idea, because panic becomes something that is not good. It could affect other markets around the world.”
Response Team At Work
Keeping all potential scenarios in mind, Dimon indicated that JPMorgan has already started the process of preparing for a default, should one come to fruition, CNBC further noted.
Part of that involves a “war room” team of experts that has reportedly been convening once a week, though meetings of the group are slated to become daily affairs close to May 21, increasing to three-times-daily discussions thereafter.
Plainly stating his desire to see power brokers from both sides of the aisle work together to reach a compromise for the sake of the economy, Dimon said, “Please negotiate a deal.”
Dimon is not the only one promulgating doomsday predictions about what might occur in the event of default, with numerous officials in the Biden administration having done the same in recent days.
White House Sounds Alarm
Earlier this month, the White House Council of Economic Advisers issued a report cautioning against what it called the “severe” economic fallout and massive job losses likely to result from even a brief default, as Reuters reported at the time.
CNBC noted that the White House outlined three possible scenarios related to the debt ceiling standoff and the consequences they could produce, depending on the amount of time they were allowed to persist.
Under a so-called “brinksmanship” scenario, in which negotiations do not produce an agreement until June 1, the White House suggests that upwards of 200,000 jobs could be in danger. A short default of a week or less would risk 500,000 jobs, and a long-term default of at least a full quarter could put 8.3 million Americans out of work, according to the report.
Under all of the possibilities discussed, the White House contends that the nation's economic growth would turn negative, and a recessionary stretch would commence without any ability on the government's part to initiate corrective action.
Though after long refusing to discuss Republican conditions for raising the debt limit, President Biden finally agreed to meet last week with top congressional leaders from both parties, and while another meeting had been planned for Friday, it was abruptly scuttled and moved to next week, according to the Associated Press.
Even so, talks at the staff level were slated to continue throughout the weekend, and the delay of Friday's meeting was reportedly not viewed as a breakdown in discussions.
With Biden apparently holding firm to his demand for a “clean” increase in the debt limit and Republicans refusing to budge on significant spending cuts, just how much progress is possible in the near future remains an open question.
“President Biden and Senator [Chuck] Schumer are stuck on no. They have no plan, no proposed savings and no clue,” said House Speaker Kevin McCarthy (CA-20), the AP noted. “Apparently, President Biden doesn't want a deal, he wants a default,” he added, but as Dimon suggests, perhaps mounting pressure on both sides to avert what could be economic calamity may yet be enough to move the needle.