A group of experienced traders from Wall Street has warned of the "unthinkable" long-term implications of a potential US default and called for a permanent repeal of the debt limit. In a letter addressed to Treasury Secretary Janet Yellen, the Treasury Borrowing Advisory Committee (TBAC) argued that the costs of the current standoff extend beyond financial markets, as financial firms are forced to prepare for a possible default.
The 17-member group, which includes executives from Goldman Sachs and JPMorgan Chase, called for the debt limit to be raised urgently and for a permanent solution to be put in place. The TBAC has been advising the Treasury Department on borrowing since 1998.
The group also proposed an alternative method of enforcing fiscal responsibility, such as requiring the limits to be raised simultaneously with appropriations or repealing the debt limit altogether.
Investors are closely monitoring the ongoing impasse over the debt ceiling, with President Joe Biden hosting congressional leaders at the White House in a bid to resolve the issue and avoid a potentially catastrophic technical default.
Goldman's co-head of global financing and chair of the advisory committee, Beth Hammack, warned of a real risk to the US dollar in a Bloomberg Television interview on Tuesday.
The TBAC's letter highlights the urgent need for a permanent solution to the debt limit issue, as the long-term implications of a default are deemed "unthinkable." It remains to be seen how policymakers will respond to this call for action, but any failure to act could have severe consequences for the US economy and global financial stability.
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