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Banks Set Up ‘War Room’ As Default Looms – Watch

Banks Set Up ‘War Room’ As Default Looms – Watch

Major banks have set up a “war room” to prepare for the possibility of a national debt default. The bank, which has not been named, is reportedly concerned about the impact that a default would have on the economy.

Veteran bank executives are together with senior lawmakers and federal officials  because the government has come within two weeks of debt default.

The debt ceiling describes a  statute established by Congress that prevents the government from spending beyond a predetermined national debt limit of $31.4 trillion. We topped that threshold earlier this year and Treasury Secretary Janet Yellen wrote in a letter that her agency expects to default on obligations as early as the first day of June.

Senate Majority Leader Chuck Schumer (D-NY) called a meeting with JPMorgan Chase CEO Jamie Dimon and Citigroup CEO Jane Fraser on Wednesday morning, according to a media report. Dimon informed the outlet that his financial institution created a “war room” to monitor contingencies should lawmakers fail to make a deal to increase the debt limit.

“I asked them to make sure that they tell everybody that default should not be an option,” Schumer told journalists after the meeting with Dimon and Fraser.

This meeting with Schumer happened one day after President Joe Biden and House Speaker Kevin McCarthy (R-CA) held talks to discuss possible ways to raise the debt limit. The GOP wants to link a temporary increase in the debt ceiling with spending limits, while Democrats say they prefer separate processes for debt limit negotiations and budget reforms.

If Congress does not raise the debt limit, the government will be unable to pay its bills. This could lead to a default on the national debt, which would have a devastating impact on the economy.

A national debt default would likely lead to a recession, rising interest rates, and a decline in the value of the dollar. It could also lead to a loss of confidence in the United States government and its ability to manage its finances.

Written by Mark Stevens - May 17, 2023