US Default Would Trigger “Significant Volatility” and “Disruptions” in Financial System, SEC Chairman Warns

“Although we didn’t know for 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 during the House Financial Services hearing. Committee.

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 uncharted waters. Uncertainties abound about that,” 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.

The United States could be weeks away from defaulting on its debt for the first time in its history.

The $ 28.4 trillion debt limit 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 that date.”

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