World top bankers warn of dire consequences if U.S. defaults

Reuters

By Emily Stephenson

WASHINGTON, Oct 12 (Reuters) - Three of the world's mostpowerful bankers warned of terrible consequences if the UnitedStates defaults on its debt, with Deutsche Bank chiefexecutive Anshu Jain claiming default would be "utterlycatastrophic."

"This would be a very rapidly spreading, fatal disease,"Jain said on Saturday at a conference hosted by the Institute ofInternational Finance in Washington.

"I have no recommendations for this audience...about puttingband aids on a gaping wound," he said.

Jain, JPMorgan Chase chief executive Jamie Dimon andBaudouin Prot, chairman of BNP Paribas, said a defaultwould have dramatic consequences on the value of U.S. debt andthe dollar, and likely would plunge the world into anotherrecession.

The U.S. Treasury Department has said it expects to max outits borrowing authority next week and won't be able toprioritize payments on U.S. debt over obligations like SocialSecurity.

Lawmakers have seemed at an impasse over raising the debtlimit. Democrats want to re-open federal agencies, which havebeen partially closed since funding ran out on Oct. 1, andRepublicans insist any debt ceiling deal includes plans to cutgovernment spending.

Dimon and other top executives from major U.S. financialfirms met with President Barack Obama and with lawmakers lastweek to urge them to deal with both issues.

On Saturday, Dimon said banks are already spending "hugeamounts" of money preparing for the possibility of a default,which he said would threaten the global recovery after the2007-2009 financial crisis.

"We need global growth," he said. "We are on the verge ofgetting it. Please let's not shoot ourselves in the foot."

Dimon also defended JPMorgan against critics who say thebank has become too big to manage. It has come under scrutinyfrom numerous regulators and on Friday reported its firstquarterly loss since Dimon took over, due to more than $7billion in legal expenses.

View Comments (1)