Jamie Dimon urges Congress to stop playing politics debt limit

September 29, 2021

Jamie Dimon urges Congress to stop playing politics with the debt limit

Jamie Dimon, a billionaire and the president and CEO of JPMorgan Chase, has sent shock waves of panic through the business world with his latest statement.

In an interview with Reuters, the businessman said that his bank, one of the largest in the country, had begun preparing for the U.S. to default on its debt on October 18.

Jamie Dimon says a U.S. default would be “catastrophic”

It is a worst-case scenario, and Dimon said such an outcome would be “catastrophic” for the country. The ramifications could be huge for the money markets. Moreover, rating agencies might create larger problems with how they react to the default.

While his remarks are a wake-up call for some, the finance guru remains cautiously optimistic that lawmakers in Washington will find a way to avoid such a dramatic situation.

However, for Dimon, it might be time for politicians in Congress to stop playing with fire when it comes to lifting the debt ceiling, something that was not controversial until recently.

In the past decade, it has become a form of leverage for the minority party. Dimon, who thought about running for president in 2020, believes that the mechanism should be abolished.

He hopes Republicans and Democrats will work in a bipartisan fashion to “get rid” of the debt ceiling one day. At the moment, this option seems unlikely.

Lawmakers are pretty reluctant to change legislative mechanisms that have been in place for a long time. The debt ceiling was created in 1917 to slow the government in its borrowing. It has been raised 57 times in the last 50 years.

Preparing for the potentially catastrophic outcome had cost JPMorgan Chase close to $100 million when a similar situation occurred in the past. In 2011, the crisis was averted just two days before the deadline.

Republicans refuse to move on the debt ceiling

This year, Senate Minority Leader Mitch McConnell has repeated that Republicans would not work with Democrats to lift the debt limit. He has encouraged the other side to use the reconciliation bill to solve the matter.

There is one major problem with this idea. Democrats have the tiniest majority in the U.S. Senate, and two of their senators are not yet on board with the reconciliation plan.

President Joe Biden and most Democrats in Congress were eyeing a $3.5 trillion spending package via the reconciliation process that only requires 51 votes instead of the usual 60 votes to pass legislation in the Senate.

Manchin and Sinema hold the cards

However, Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona have come out against the size of the package. They will only support something significantly smaller.

Negotiations are underway between the different factions of the Democratic Party, but there is no end in sight for an agreement.

On Tuesday, Senate Republicans blocked a bill that the House voted. It would have lifted the debt limit and averted a government shutdown.

The GOP is playing hardball on this serious issue because, according to polls, Democrats will receive the most blame if the country defaults and the government shuts down.

Since they control Congress and the White House, most Americans see Democrats as the ones in charge. Experts predict the crisis will be averted, although the outcome is not clear right now.

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