Oct 8 Top U.S. bankers have warned the Obama
administration and Republican lawmakers that any move to pay
interest on debt before obligations such as Social Security and
payments to veterans would pose severe risks to financial
markets and the economy, the Wall Street Journal reported.
Some lawmakers think prioritizing interest payments would
placate bond investors if the government breaches its borrowing
limit, the Journal said.
However, heads of the nation's largest financial
institutions told the officials in meetings that prioritizing
some payments would create insurmountable uncertainty for
investors, drive up borrowing costs and disrupt markets, the
Journal said, citing people familiar with the meetings.
As the U.S. government moved into the second week of a
shutdown on Monday with no end in sight, a deadlocked Congress
also faced an Oct. 17 deadline to increase the nation's
borrowing power or risk defaulting on its debt.
If no deal is reached, many outside observers including
debt-ratings firms assume the government will begin prioritizing
payments to bondholders over others, rather than risk defaulting
on its debt, the Journal said. ()