American financial firms expressed alarm over fears that an increasingly dysfunctional US Congress may fail to reach an agreement to raise the country’s debt ceiling.
Bitter divisions among Republican Party lawmakers and President Donald Trump’s unpredictability could rule out a deal to raise the US debt limit before an October deadline, several lobbyists representing dozens of bankers, investors and credit rating agencies, told media, presstv reported.
Trump’s attacks on members of his own party and his failure to denounce white supremacists at a violent protest in Charlottesville, Virginia, this month, has raised questions over the president’s ability to build consensus on the debt limit, one bank lobbyist told reuters.
“Everyone is very worried,” he added.
The debt ceiling is a legislative limit on how much money the federal government can borrow from the US Treasury Department to fund its budget deficits and meet financial obligations.
“The stakes here are incredibly high. The economic impact associated with debt default is so immense,” said Rob Nichols, president and CEO of the American Bankers Association (ABA), one of the country’s key financial lobby groups.
“We’re monitoring this extremely closely and we will mobilize as needed throughout September,” he added.
US Treasury Secretary Steven Mnuchin urged lawmakers in July to raise the limit by September 29, otherwise the US government might not have enough money to pay all its bills.
Mnuchin said on Sunday that relief funding for the devastation caused by Harvey Hurricane might be delayed if Congress does not quickly increase the government’s debt limit.
Failure to increase the cap from the current $19.8 trillion could lead to default, sending shockwaves across global markets.
Goldman Sachs, an American financial services company, estimated that failure to raise the ceiling would force a government spending cut equal to between 3 and 4 percent of US gross domestic product, which would have crippling economic consequences.
Many conservative Republicans have indicated they will only vote for a debt limit bill that contains promises of federal spending cuts.
The US has faced several debt-ceiling crises in recent years. The now-notorious 2011 crisis led Standard & Poor’s (S&P), the world’s largest rating agency, to downgrade the credit rating of the US government for the first time in the country’s history.
S&P warned last week that failure by Congress to lift the debt ceiling would likely be “more catastrophic” than the collapse of Lehman Brothers in 2008 that led to the global financial crisis.