Raise debt ceiling, banks urge

Executives fear economic harm if Congress stalls

July 29, 2011|By Phil Mattingly and Peter Cook, Bloomberg News

Jay Hooley (above) of State Street Corp. and Lloyd Blankfein of Goldman… (Aram Boghosian for the Boston…)

WASHINGTON - Bankers including Goldman Sachs Group chairman and chief executive Lloyd Blankfein and JPMorgan Chase & Co. chief Jamie Dimon called on President Obama and Congress to raise the federal debt limit to steer the US government away from the threat of default.

’’The consequences of inaction - for our economy, the already struggling job market, the financial circumstances of American businesses and families, and for America’s global economic leadership - would be very grave,’’ the executives wrote in the letter sent yesterday by the Financial Services Forum, a Washington-based trade group representing the largest banks.

The House of Representatives was scheduled to vote yesterday on a debt-limit proposal that would face opposition from the Senate’s Democratic majority, setting up a congressional showdown ahead of the Aug. 2 deadline for raising the $14.3 trillion ceiling. Senate majority leader Harry Reid, a Nevada Democrat, has pledged to kill House Speaker John Boehner’s measure if the Ohio Republican’s plan is sent to the Senate.

As congressional leaders wrangled over debt-limit plans, the Standard & Poor’s 500 index fell 2 percent yesterday, the biggest drop in almost two months. The cost of insuring against a US default climbed to the highest level since February 2010.

’’A default on our nation’s obligations, or a downgrade of America’s credit rating, would be a tremendous blow to business and investor confidence - raising interest rates for everyone who borrows, undermining the value of the dollar, and roiling stock and bond markets,’’ the group of financial industry executives wrote in the letter to Congress and the White House.

In addition to Blankfein and Dimon, the letter included signatures from chief executives representing Bank of America Corp., Citigroup Inc., Morgan Stanley, US Bancorp, Wells Fargo & Co., and State Street Corp.

The executives’ letter came on the same day the US Chamber of Commerce, Financial Services Roundtable, National Association of Manufacturers, and National Retail Federation joined with 111 other business associations to urge House members to vote for Boehner’s proposal.

’’While no legislation is perfect, the current proposal cuts spending immediately by more than the extension of the debt ceiling, provides an enforceable mechanism to produce additional spending reductions with extensions of the debt limit predicated on these cuts, and allows for a vote on significant procedural change to our budgeting process,’’ the associations wrote in the letter sent to House members yesterday.

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