JPMorgan Chase has begun preparing for the possibility of the United States reaching its debt limit, CEO Jamie Dimon told Reuters on Tuesday, adding that he nevertheless expected policymakers to find a solution to prevent that “potentially catastrophic” event.
With federal funding set to expire Thursday and a potential default on Oct. 18, Democrats narrowly controlling the Senate and House are racing to avert a fiscal disaster, while also pushing President Joe Biden’s ambitious $3.5 billion spending package. pass.
JPMorgan, the nation’s largest bank, has begun planning scenarios for how a potential U.S. credit default would affect repo and money markets, customer contracts, its capital ratios and how rating agencies would respond, Dimon said in an interview.
“This is the third time we’ve had to do this, it’s a potentially catastrophic event,” he said, referring to past stalemates in Congress over federal debt limits.
Jamie Dimon, CEO of JPMorgan Chase, says the bank is preparing for the possibility of the United States hitting its debt limit, calling it a “potentially catastrophic” scenario
As the pressure mounts, President Joe Biden and Democrats try to avert a fiscal emergency and get through their massive $3.5 trillion spending bill
“Every time this comes up, it gets resolved, but we should never get that close. I just think this whole thing is a mistake and that one day we should just have a bipartisan bill and abolish the debt ceiling. It’s all political,” he added.
Congressional Democrats struggle to find a way to raise the government’s $28.4 trillion borrowing limit before the Treasury Department runs out of ways to pay off the nation’s debt.
Treasury Secretary Janet Yellen has said the Treasury will likely exhaust the extraordinary measures by Oct. 18, potentially leading to the first federal credit default in history.
Democrats had hoped to avoid a partial government shutdown and suspend the federal debt ceiling by one vote. But they were blocked in the Senate Monday by Republicans, who said the two cases should be dealt with separately.
Fiscal brinkmanship has become a fixture of American politics over the past decade thanks to continued partisan polarization, with debt-ceiling deals coming to an end in 2011 and 2017.
Dimon said the bank was combing through its customer contracts as part of the preparations, a labor-intensive process.
“You have to check the contracts to try and predict it… If I remember correctly, it cost us $100 million the last time we prepared for this,” he said.
Senators fail to pass government financing bill on September 27, 2021
As pressure mounted, Biden and Democrats in Congress on Tuesday scrambled to trim his $3.5 trillion government overhaul to win the support of two key senators before the make-or-break deadlines for vote.
With Republicans vehemently opposed to tying the debt ceiling to Biden’s spending package, and with no Democratic votes left, West Virginia Senators Joe Manchin and Arizona Kyrsten Sinema now hold the key votes in the evenly split Senate.
Biden is under pressure to close the deal with Manchin and Sinema, who are seen as pivots for the final package.
The two centrist senators have said they cannot support Biden’s proposed price tag and are now being pressured to say how high they are willing to go.
The president met them separately at the White House to reach an agreement before a test vote on Thursday.
“Really good, honest, straight forward negotiations,” Manchin told reporters at the Capitol. He said he hadn’t given Biden a new topline figure.
And it’s not just Biden’s fellow Democrats in the Senate. A small number of House Democrats also struggle with the far-reaching scope of Biden’s domestic agenda, demanding changes before agreeing to vote yes.
House Speaker Nancy Pelosi told reporters at the Capitol, “In a day or so, we hope to get to a place where we can all move forward.”
Democratic Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona now hold the key votes in the evenly divided Senate
“We are clearly in a very sensitive moment,” White House press secretary Jen Psaki said.
The president, she said, “will not tell anyone what to do. He’s going to have a conversation, have an engagement.’
The closed-door talks come after Republican senators for the second time blocked a bill to keep the government working and allowing federal loans after Thursday, risking a federal shutdown and devastating default — though both seem highly unlikely. .
Democrats said they will try again before Thursday’s deadline to pass a bill to fund government operations after the Sept. 30 fiscal year ends, likely putting the more heated debate over the debt cap for another day. taken away, closer to a separate deadline in October.
Taken together, it brings the entire Biden agenda dangerously closer to collapse, with repercussions that are sure to shape his presidency and the political future of lawmakers.