You should be concerned: Obama warns world markets there is no guarantee U.S. will avoid defaulting on its debts

barack

  • ‘Exasperated’ president says shutdown feud may prevent debt solution
  • He said: ‘When you have a faction willing to default, we are in trouble’
  • Says he is not willing to water down healthcare bill to break deadlock
  • Held crunch meeting with Wall Street bankers over budget impasse
  • Goldman Sachs chief: ‘Consequences of default are extremely adverse’

An ‘exasperated’ Barack Obama offered no guarantees the U.S. would avoid an unprecedented default during a crisis meeting with Wall Street bankers yesterday.

The President said it could not be taken for granted that the political infighting over the federal shutdown would ease in time to raise the legal debt limit before the October 17 deadline.

Speaking on CNBC last night, he said: ‘I think this time is different. I think they should be concerned.

‘When you have a situation in which a faction is willing to default on U.S. obligations, then we are in trouble.’

Chief executives from major financial institutions met Obama over the first budget impasse for 17 years in a row over healthcare and finances.

They warned of ‘adverse’ consequences if the U.S. government agencies remain closed and if lawmakers failed to raise the debt ceiling by mid-October.

After the meeting, Goldman Sachs chief executive Lloyd Blankfein implicitly criticised Republicans for using their opposition to Obama’s healthcare law as a weapon that could lead to a devastating default.

‘You can litigate these policy issues. You can re-litigate these policy issues in a political forum, but they shouldn’t use the threat of causing the U.S. to fail on its … obligations to repay on its debt as a cudgel,’ said Mr Blankfein.

Congressional Republicans and the White House are in a stalemate over government funding – chiefly as a tactic in the Republican campaign to stop Obama’s health insurance reforms.

The President stressed to congressional leaders last night that he will not negotiate with Republicans over a government shutdown or raising the U.S. debt limit, the White House said.

After more than an hour of talks at the White House that did not lead to a breakthrough, the White House issued a statement saying that Obama remains hopeful that ‘common sense will prevail’ in the budget stand-off.

‘The president made clear to the leaders that he is not going to negotiate over the need for Congress to act to reopen the government or to raise the debt limit to pay the bills Congress has already incurred,’ the White House said.

House Republicans have been demanding that Obama agree to cut funding or delay implementation of his signature healthcare law in exchange for their agreement to approve spending measures to reopen the government.

Obama held talks in the Oval Office with the top U.S. Republican, House of Representatives Speaker John Boehner, the Senate Republican leader Mitch McConnell, the top Democrat in Congress, Senate Majority Leader Harry Reid, and House Democratic leader Nancy Pelosi.

It was their first face-to-face talks since a government shutdown began on Tuesday.

While the U.S. government closure has already had repercussions from frustrated tourists turned away from national parks to cancelled stops on Obama’s Asia  trip, the deadline for raising the nation’s debt limit poses a much graver risk.

If the U.S. Congress fails to raise the $16.7trillion (€12.3trillion) borrowing cap, the U.S. would go  into default, likely triggering financial market shockwaves around the world.

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The President stressed to congressional leaders last night that he will not negotiate with Republicans over a government shutdown or raising the U.S. debt limit, the White House said.

After more than an hour of talks at the White House that did not lead to a breakthrough, the White House issued a statement saying that Obama remains hopeful that ‘common sense will prevail’ in the budget stand-off.

‘The president made clear to the leaders that he is not going to negotiate over the need for Congress to act to reopen the government or to raise the debt limit to pay the bills Congress has already incurred,’ the White House said.

House Republicans have been demanding that Obama agree to cut funding or delay implementation of his signature healthcare law in exchange for their agreement to approve spending measures to reopen the government.

Obama held talks in the Oval Office with the top U.S. Republican, House of Representatives Speaker John Boehner, the Senate Republican leader Mitch McConnell, the top Democrat in Congress, Senate Majority Leader Harry Reid, and House Democratic leader Nancy Pelosi.

It was their first face-to-face talks since a government shutdown began on Tuesday.

While the U.S. government closure has already had repercussions from frustrated tourists turned away from national parks to cancelled stops on Obama’s Asia  trip, the deadline for raising the nation’s debt limit poses a much graver risk.

If the U.S. Congress fails to raise the $16.7trillion (€12.3trillion) borrowing cap, the U.S. would go  into default, likely triggering financial market shockwaves around the world.

‘There’s no debate that the seriousness of the U.S. not paying its debts… is the most serious thing we have, and we witnessed that in August 2011 and you saw the ramifications: a slowdown in the economy,’ said Brian Moynihan, chief executive of Bank of America.

The country came close to default during a similar political crisis in 2011. That stand-off prompted  the first downgrade of the U.S. credit rating.

Conservative Republicans have signalled they will take the same tactic on the debt limit this year as they did on government funding by seeking to dismantle or put off the healthcare law. President Obama has declined to negotiate over raising the debt limit.

Business leaders made clear the financial world wanted to avoid the risk of the government not paying its bills.

‘There is precedent for a government shutdown. There’s no precedent for default. We’re the most important economy in the world. We’re the reserve currency of the world,’ said Mr Blankfein.

‘Business leaders want Washington to understand ‘the long-term consequences of a shutdown … certainly the  consequences of a debt ceiling  [not being raised], and we all agree that those are extremely adverse,’ he said.

Michael Corbat of Citigroup and others were scheduled to attend the session.

‘I think both sides have a pretty good appreciation for what’s at stake here,’ said Mr Corbat. He said the executives were ‘trying to encourage both sides to engage.’

Obama is scheduled to meet the top leaders of Congress at the White House. Treasury Secretary Jack Lew is to brief the leaders on the impacts of the threat of default in 2011 and the economic imperative for Congress to act to raise the debt ceiling.

http://www.dailymail.co.uk/news/article-2442363/Obama-warns-world-markets-guarantee-U-S-avoid-defaulting-debts.html
 

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