Just in case you were hoping the whole debt-ceiling U.S. default thing would just fizzle out and go away Y2K-style, today the heads of major banks signed a letter to President Obama and the Congress saying, in effect, a U.S. default would be really, really bad. From the letter:
The consequences of inaction -- for our economy, the already struggling job market, the financial circumstances of American businesses and family, and for America's global economic leadership -- would be very grave.
Our economic recovery remains very fragile. A default on our Nation's obligations, or a downgrade of America's credit rating, would be a tremendous blow to business and investor confidence -- raising interest rates for everyone who borrows, undermining the value of the Dollar, and roiling stock and bond markets -- and, therefore, dramatically worsening our Nation's already difficult economic circumstances. Given this very real risk, policymakers must correct our fiscal course now, inspire market confidence by paying all of our bills on time, and demonstrate that America is a democracy capable of putting differences aside to solve our most challenging problems.
The message here probably isn't anything you haven't heard if you've been paying any attention to this issue. Our own Greg McBride told Market Watch a few weeks ago that in the event of a default, "There will be no safe haven."
What's interesting about this default warning is its source. From Kate Davidson at American Banker:
Banks have largely refrained from weighing in on the debt ceiling debate, fearing their input could undercut negotiations.
You know when the "masters of the universe" are getting nervous, things aren't looking good for your average consumer. We can only hope that partisans in Washington, D.C. realize that any victory that comes at the cost of a default would be a Pyrrhic one, both for consumers and likely for the politicians that engineered it.