Wall Street Pushes GOP on Debt Vote
Politico reports:
Wall Street executives and their Washington lobbyists have been meeting quietly with members of Congress — particularly reluctant House GOP freshman — to urge that they vote in favor of raising the $14.29 trillion debt limit as quickly as possible, sources close to the matter said.
Executives from the deep-pocketed industry that traditionally pumps millions into political campaigns are warning members that failure to raise the limit would risk a spike in interest rates, a possible collapse in equity prices, bank failures and a severe depression.
Treasury Secretary Timothy Geithner has repeatedly warned Congress that without new borrowing authority, the federal government could hit the statutory debt limit by May 16. Treasury could then implement emergency measures to continue making interest payments on existing debut until around July 8. After that, the U.S. risks going into default, an unthinkable idea to many economists.
Only JPMorganChase and its outspoken chief executive, Jamie Dimon, has spoken publicly on the issue. Other banks worry taking a public stance could drive Wall Street’s already low reputation down further.
“Jamie [Dimon] is passionate about this and has spoken out about it. Others would [speak out] but understand what an enormous political cauldron this is,” one senior financial executive told Politico. “And it’s not is if anything coming from financial institutions, especially those who took TARP money, is terribly helpful right now.” He was referring to the Troubled Asset Relief Program, which saved banks from failure during the 2008 financial crisis.
The executive said lobbyists and bank officials were instead meeting privately with members over coffee to make the case that the debt limit should be separated from the debate on long-term deficit and debt reduction.
There have been no threats thus far to remove financial support from members who refuse to support raising the limit, but the financial industry is making clear its stand on the matter.
“We tell them how catastrophic this would be to even come close and break faith with global investors,” the executive said. “Some totally get it and have candidly told us they won’t allow a default. Others say they won’t and don’t buy the argument that if we don’t raise the limit we default.”
A second financial industry source told Politico that industry groups holding meetings with members on the debt limit include the U.S. Chamber of Commerce, the National Association of Manufacturers and the Financial Services Forum.
The financial source called these meetings “educational visits to outline the very harsh economic consequences of defaulting on our debt,” and said that “with economic growth finally picking up, we can’t afford the massive spike in borrowing costs that would result if we defaulted in our obligations. Sharply higher interest rates would likely derail the economic recovery and balloon the nation’s interest burden, dramatically worsening our overall debt scenario.”
Not all members who attend the meetings are sympathetic to the bank’s arguments, sources said. Several have told banking executives and lobbyists that they will not support an increase, arguing instead that current tax revenues should be diverted to debt service, making an increase in the borrowing limit unnecessary.
