There'll be a stock-market disaster if the US debt crisis isn't resolved soon, Goldman Sachs' David Solomon and other top execs warn
Reuters / Shannon Stapleton
- There'll be a stock-market disaster if the debt-ceiling standoff isn't resolved soon, 144 top execs have warned.
- "Action to end the pending debt crisis is necessary now," they said in an open letter to president Joe Biden and congressional leaders.
- Goldman Sachs CEO David Solomon and Morgan Stanley boss James Gorman both signed Tuesday’s letter.
There could be a stock-market disaster if US lawmakers don't vote to lift the debt ceiling soon, some of the biggest names on Wall Street warned Tuesday.
Goldman Sachs CEO David Solomon, Morgan Stanley boss James Gorman, and 142 other top execs signed an open letter addressed to president Joe Biden and congressional leaders that urged them to resolve the ongoing impasse before the government runs out of cash.
"We write to emphasize the potentially disastrous consequences of a failure by the federal government to meet its obligations," the execs said. "Absent a resolution, the government is likely to run out of money as soon as June 1."
"Action to end the pending debt crisis is necessary now."
The debt ceiling is a limit on how much the government can borrow, set by Congress.
The US hit its $31.4 trillion ceiling on January 19 - but the Biden administration and the Republican-led House of Representatives can't agree on how to resolve the brewing crisis.
Republicans are refusing to vote to lift the borrowing limit unless the White House agrees to future spending cuts, which Biden and Senate believe should be voted on separately.
The so-called "X-date" when the government runs out of money could come as early as June 1 unless Congress votes to raise the debt ceiling, according to Treasury Secretary Janet Yellen.
The last time the government came so close to a default was in 2011 – and that led to stock markets plunging around the world, the signatories of Tuesday's letter pointed out.
The Standard & Poor's ratings agency also stripped the US of its triple-A rating then, signaling it was considered less likely to be able to repay its debts.
Uncertainty from the 2011 crisis also drove up unemployment by 0.7%, according to Moody's.
The execs warned that failure to resolve the debt-ceiling standoff soon could be even more devastating this time around, with the US economy suffering from high inflation and reeling from the collapse of regional lenders Silicon Valley Bank and First Republic in recent months.
"Failure to resolve the current impasse could easily have more negative consequences," they wrote.
"Although the American economy is generally strong, high inflation has created stresses in our financial system, including several recent bank failures. Much worse will occur if the nation defaults on our debt obligations, which would weaken our position in the world financial system."
"We strongly urge that an accord be reached quickly so that the country can avert this potentially devastating scenario," the business leaders added.
Read more: Wall Street is bracing for stock market chaos as the debt-ceiling face-off drags on
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