US Default Would Trigger “Significant Volatility” and “Disruptions” in Financial System, SEC Chairman Warns
By Matt Egan, CNN Business
Gary Gensler, chairman of the Securities and Exchange Commission, warned lawmakers on Tuesday that a US default would likely trigger historic stress in financial markets, as Treasuries are the bedrock of the entire system.
“While we weren’t sure we would have significant volatility in the markets and we would see breaks in the system, but I couldn’t predict which companies,” Gensler said at the House Financial Services Committee hearing.
Gensler, who previously served as a senior official in the Treasury Department and headed the Commodity Futures Trading Commission, added that there is great uncertainty about what will happen to mortgages, auto loans and market funds. monetary – as well as banks that depend on money. market fund.
“We would be in very unknown waters. Uncertainties abound about this, ”Gensler said.
The SEC chairman said what is known, however, is that US Treasuries are the “foundation of all of our capital markets.”
“If that were to fail, we would face some of the biggest challenges in our financial industry, possibly much bigger than we’ve seen in the past,” Gensler said.
United States could be a few weeks away from defaulting on his debt For the very first time.
The debt limit of $ 28.4 trillion was reinstated on August 1. Since then, Treasury Secretary Janet Yellen has kept the country’s finances afloat using emergency accounting maneuvers. Known as “extraordinary measures,” these measures allow the government to borrow additional funds without exceeding the debt ceiling.
But Yellen warned lawmakers that if Congress does not raise or suspend the debt ceiling, the federal government will exhaust these extraordinary measures by October 18.
“At this point, we would expect the Treasury to end up with very limited resources that would quickly run out,” Yellen wrote in a letter to Congress. “It is not certain that we would continue to meet all of the nation’s commitments after this date.”
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