World top bankers warn of dire consequences if U.S. defaults

WASHINGTON Sat Oct 12, 2013 1:56pm EDT

Deutsche Bank Co-chief Executive Anshu Jain delivers his speech during the annual meeting of the German business newspaper Handelsblatt in Frankfurt September 4, 2013. REUTERS/Ralph Orlowski

Deutsche Bank Co-chief Executive Anshu Jain delivers his speech during the annual meeting of the German business newspaper Handelsblatt in Frankfurt September 4, 2013.

Credit: Reuters/Ralph Orlowski

WASHINGTON (Reuters) - Three of the world's most powerful bankers warned of terrible consequences if the United States defaults on its debt, with Deutsche Bank chief executive Anshu Jain claiming default would be "utterly catastrophic."

"This would be a very rapidly spreading, fatal disease," Jain said on Saturday at a conference hosted by the Institute of International Finance in Washington.

"I have no recommendations for this audience...about putting band aids on a gaping wound," he said.

Jain, JPMorgan Chase chief executive Jamie Dimon and Baudouin Prot, chairman of BNP Paribas, said a default would have dramatic consequences on the value of U.S. debt and the dollar, and likely would plunge the world into another recession.

The U.S. Treasury Department has said it expects to max out its borrowing authority next week and won't be able to prioritize payments on U.S. debt over obligations like Social Security.

Lawmakers have seemed at an impasse over raising the debt limit. Democrats want to re-open federal agencies, which have been partially closed since funding ran out on October 1, and Republicans insist any debt ceiling deal includes plans to cut government spending.

Dimon and other top executives from major U.S. financial firms met with President Barack Obama and with lawmakers last week to urge them to deal with both issues.

On Saturday, Dimon said banks are already spending "huge amounts" of money preparing for the possibility of a default, which he said would threaten the global recovery after the 2007-2009 financial crisis.

"We need global growth," he said. "We are on the verge of getting it. Please let's not shoot ourselves in the foot."

Dimon also defended JPMorgan against critics who say the bank has become too big to manage. It has come under scrutiny from numerous regulators and on Friday reported its first quarterly loss since Dimon took over, due to more than $7 billion in legal expenses.

(Reporting by Emily Stephenson and Douwe Miedema; Editing by Andrea Ricci)

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Comments (341)
2Borknot2B wrote:
The banks and multi-national corporation have almost assumed complete control the citizenry of the USA. America wants America back for its own citizens. The constitution that is respected by WE THE PEOPLE specifically states who does and who does not have control over this country. By shutting down the government to obtain more gambling debt is a spot on demonstration that the house has been viewed in the past as nothing more than a blank check book. Now the house wants to do it’s job, and the banks are shocked. On the verge of “World Recovery” or complete dominion?

Oct 12, 2013 2:09pm EDT  --  Report as abuse
Lakia wrote:
The US is facing dire economic repercussions with or WITHOUT default, as long as we keep spending like we have, on food stamps, disability, and Obamacare.

Oct 12, 2013 2:16pm EDT  --  Report as abuse
Flukie wrote:
Bernanke is already the current buyer of US Treasuries that he purchases with money created out of thin air, so let him buy whatever debt there is and stop this kabuke dance of “we’re going to default and the market’s gonna crash nonsense”.

Oct 12, 2013 2:22pm EDT  --  Report as abuse
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