Tags: white house | chief executive | shutdown | debt ceiling

Blankfein Says Finance CEOs Urge Action on Debt Limit

Wednesday, 02 October 2013 01:52 PM

Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein left a White House meeting with President Barack Obama and said lawmakers are risking the economic recovery if they don’t raise the federal debt ceiling.

Blankfein was among a group of financial-industry executives including JPMorgan Chase & Co. CEO Jamie Dimon and Brian Moynihan, CEO of Bank of America Corp., who met with the president today, the second day of a partial government shutdown. Democrats and Republicans are deadlocked on spending legislation and already are battling over raising the U.S. debt limit, which is required by later this month to avoid a default.

“There’s a consensus that we shouldn’t do anything that hurts this recovery,” Blankfein said as he left the White House. “They shouldn’t use the threat of causing the U.S. to fail on its obligations to repay its debt as a cudgel.”

The meeting, set up by the Financial Services Forum, a Washington-based trade group representing CEOs for the largest Wall Street banks, was part of an effort by the Obama administration to leverage the business community’s clout in breaking the stalemate. Administration officials said pressure from the business community was effective in past fiscal fights.

“The financial community is in an excellent position to educate the public about the consequences to every-day folks in the event we default,” said Valerie Jarrett, a senior adviser to the president.

Debt Debate

The group met earlier with the No. 2 and No. 3 Republicans in the House of Representatives, Majority Leader Eric Cantor of Virginia and Kevin McCarthy of California.

Blankfein said the executives were “apolitical” and not taking sides on the underlying political issues, including Republican demands that the president’s health-care law be stripped of funding or delayed as the price of a deal.

Those arguments, he said, shouldn’t be connected to taking action to make sure the government can pay its bills.

“There’s precedent for a government shutdown; there’s no precedent for default,” he said. “We really haven’t seen this before and I’m not anxious to be part of the process to witness this.”

Moynihan said the goal of the executives was to make sure “people understand the seriousness of the situation.”

Debt Deadline

Even as the government remains shut down, raising the government’s $16.7 trillion debt limit has become the focal point for White House officials and the business community.

Treasury Secretary Jacob J. Lew reiterated in a letter to lawmakers yesterday that the U.S. will hit the debt ceiling no later than Oct. 17 and urged them to increase the nation’s borrowing authority “immediately.”

As he arrived at the White House, Dimon said he hoped an agreement will be reached before the debt-ceiling deadline.

“We just want solutions,” Dimon said. “I think if people do the right things, America can grow aggressively and grow rapidly. That’s what we should be looking for.”

Gene Sperling, the director of Obama’s National Economic Council, said yesterday there was a “false sense of complacency among some in the market that somehow things will always be solved at midnight.”

Market Impact

Market participants need to realize that “unless sensible people in the Republican Party are willing to take back control of their party, that there is a much more serious risk of a very negative economic and financial event,” Sperling said at a Bloomberg luncheon in Washington.

Stocks slid around the world and gold rallied on the second day of the shutdown. The MSCI All-Country World Index dropped 0.3 percent at 2:05 p.m. in New York and the Standard & Poor’s 500 Index slipped 0.2 percent, paring an earlier drop of as much as 0.9 percent. Companies that rely on government contracts, including United Technologies Corp., Lockheed Martin Corp. and Raytheon Co. helped lead losses.

The other executives listed by the White House as attending the meeting were:

Robert Benmosche, CEO of the American International Group Inc.; Michael Corbat, CEO of Citigroup Inc.; Douglas Flint, chairman of HSBC Holdings Plc; James P. Gorman, CEO of Morgan Stanley; Gerald L. Hassell, CEO of Bank of New York Mellon Corp.; Jay Hooley, CEO of State Street Corp.; Anshu Jain, Co-CEO of Deutsche Bank AG; Abigail Johnson, president of Fidelity Investments; John Rogers, executive vice president of Goldman Sachs Group Inc.; Keith Sherin, CEO of General Electric Capital Corp; John Stumpf, CEO of Wells Fargo & Co., and Rob Nichols, CEO of the Financial Services Forum.

Industry Influence

The executives may have some financial clout with congressional Republicans. The securities and investment industry was a top source of campaign cash for House Republican leaders in the 2012 election cycle as they lobbied against new regulations.

The industry contributed $1.4 million to House Speaker John Boehner’s campaign in the 2012 cycle compared with $180,600 in the 2008 elections, according to data compiled by the Washington-based Center for Responsive Politics, a nonprofit research group. Cantor, the House majority leader, received $908,900 from the industry compared with $222,000 in 2008.

Obama has had a sometimes rocky relationship with the industry. He has repeatedly blamed “reckless and irresponsible” risk-taking at financial institutions for precipitating the banking crisis triggered by the Sept. 15, 2008, bankruptcy filing by Lehman Brothers Holdings Inc.

In 2009, he criticized “fat-cat bankers” who continued receiving bonuses and were fighting his effort to impose tougher regulation on the industry.

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Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein left a White House meeting with President Barack Obama and said lawmakers are risking the economic recovery if they don't raise the federal debt ceiling.
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Wednesday, 02 October 2013 01:52 PM
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