WASHINGTON The United States could trigger "another catastrophic financial crisis" if Congress fails to raise the debt limit, the chairman of the Treasury Borrowing Advisory Committee said.
"Any delay in making an interest payment by Treasury even for a very short period of time would put the U.S. Treasury and overall financial markets in uncharted territory, and could trigger another catastrophic financial crisis," Matthew Zames, managing director of J.P. Morgan and TBAC chairman said in a letter to U.S. Treasury Secretary Timothy Geithner.
The letter dated April 25 came as Congress is under pressure to raise the current $14.24 trillion debt limit to continue funding the government.
However, Republicans are pressing for deeper budget cuts in return for raising the debt ceiling.
Zames warned a default by the U.S. Treasury, "or even an extended delay in raising the debt ceiling, could lead to a downgrade of the U.S. sovereign credit rating."
That could increase Treasury's borrowing costs by "a full percentage point for each one-notch downgrade," he said.
(Reporting by Doug Palmer; Editing by James Dalgleish)