South Court Auditorium
Eisenhower Executive Office Building
1:05 P.M. EDT
THE PRESIDENT: I want to thank — you can take these off while we’re speaking. I want to thank our participants that are here, as well as those who are on Zoom. And this is, to state the obvious, an important get-together here.
And I’m going to make some brief comments, maybe ask a few questions. And then we’ll yield and go down the road here and maybe we can — all of us, both virtually as well as in person here — we can hopefully make some progress.
I want to thank the Secretary of Treasury, Secretary Yellen; Commerce Secretary Raimondo — I see her on the screen there — it’s good to see you; and the leaders of some of America’s most important businesses and institutions, the American Association of Retired Persons — the AARP — Bank of America, Citibank, Deloitte, Intel, JP Morgan, Nasdaq, the National Association of Realtors, and Raytheon, and — for joining me today to talk about the need to raise the debt limit.
We haven’t failed to do that since our inception as a country. We need to act. These leaders know the need to act.
The United States pays its bill. It’s who we are. It’s who we’ve been. It’s who we’re going to continue to be, God willing. That’s what’s called the “full faith and credit of the United States.”
Let’s be clear: Raising the debt limit is paying our old debts. It has nothing to do with new spending or what may be coming this year or other years. It has nothing to do with my plans on infrastructure or building back better, both of which are paid for but they’re not even in — in the queue right now.
It’s about paying for what we owe and preventing a catastrophic event occurring in our economy.
I’m glad these leaders are here to talk about the real-world impact this is going to have on people and on our position in the world.
Today’s discussion won’t be partisan. It shouldn’t be. Raising the debt limit is usually bipartisan.
Let me speak for myself here: I want to be clear so the American people understand what’s going on. There’s a Senate vote today to raise the debt limit. Traditionally, it needs only 50 votes. I was — we were informed by our Republican friends that they had to be all Democrat votes; they weren’t going to help. I said, “Okay. We’ll provide 50 votes.”
The definition — and the Democrats, we have the votes. The Democrats are willing to step up and stop this economic catastrophe if Senate Republicans will just get out of the way. But our Senate Republicans friends are planning to block the vote to raise the dem- — the debt limit by using a pro- — the procedural power called a “filibuster.”
To say that in plain English, it means you have to have 60 votes when there’s a filibuster. Sixty votes — a supermajority –- instead of fifty to get anything done. It’s not right, and it’s dangerous.
The reason we have to raise the debt limit is, in part, because of the policies of the previous administration, which incurred nearly $8 trillion in bills in four years — some of which Democrats voted for — more than a quarter of all the debt now outstanding.
We had to raise the debt limit three times when Donald Trump was President. And the Republicans moved to raise it each time, and each time the Democrats supported the effort to raise the debt.
But now Republicans won’t raise the debt limit despite being responsible for what the debt limit — why it has to be raised for the bills that are outstanding.
They won’t raise it enough through — if they don’t, we’re going to be defaulting on the debt that would lead to self-inflicted wounds that risk the market tanking and wiping out retirement savings and costing jobs.
Defaulting on the debt, which Secretary Yellen said could happen at any day after October the 18th — that’s when we run out of money — means that Social Security benefits will stop, salaries to service members will stop, benefits to veterans will stop, and much more.
The failure to raise the debt limit will undermine the safety of the United States Treasury securities; threaten the reserve status of the dollar as the world currency and the — that the world relies on; downgrade America’s credit rating; and result in a rise in interest rates for families — talking about mortgages, auto loans, credit cards.
My friends — and they are — many are my friends — the Senate Republicans’ position I find to be not only hypocritical, but dangerous and a bit disgraceful, especially as we’re crawling our way out of a pandemic that cost America 700,000 lives thus far, and we’re still battling it. Our markets are rattled. America’s savings are on the line. The American people — your savings, your pocketbook — are directly impacted by this stunt. It doesn’t have to be this way.
My Republican friends need to stop playing Russian roulette with the U.S. economy. If they don’t want to do the job, just get out of the way. We’ll take the heat. We’ll do it. We will do it. Let us do it. Let the Democrats vote to raise the debt limit without obstruction or any further delays.
House Democrats have already passed the bill that would do that — raise the debt limit and keep the government functioning. It’s sitting in the United States Senate right now, where Democrats, with no help from Republicans, have the votes today to pass the debt limit.
The path Republicans offer would take us right to the brink and cause irreparable economic damage, in my view. So, let’s vote and end this mess today. That’s the only way to eliminate the uncertainty and risk that will remain for American families and our economy if we don’t.
Over more than 200 years, America has built this hard-earned reputation of the strongest, safest, and most secure investment in the world. And that’s why the United States is the financial rock the world looks to and trusts.
Now, in one cynical, destructive, partisan ploy — just for politics — our Republican friends are teetering on the brink here. They’re threatening to boot that all away. Now it’s a meteor headed to crash into our economy. We should all want to stop it — stop it immediately. This shouldn’t be partisan.
And I’m thankful for the leaders who share the urgency on why — why we need to act — and we act — need to act now. Many of them are here with me. Not — not next week, now.
I look forward to hearing from the — their perspectives and — and we’ll now get the — get this meeting started, with my colleague’s permission.
I’d like to start off, if I may, with a question for Jane Fraser, the CEO of Citi. And, by the way, congratulations on your award. You run one of the largest banks in America. And what impacts are you seeing or do you think you’ll see from this obstruction? What does it mean for the small businesses and everyday people if we — if we renege on the debt here?
MS. FRASER: Thank you, Mr. President, for inviting us all to talk about this critical issue. As the head of the bank, I don’t have insight on what the right legislative solution is, but I can tell you that, from an economic perspective, we need to resolve this issue very quickly.
Every day of delay right now comes with an increase in price, as we’ve begun to see in the markets already, starting last Friday.
America certainly cannot default on the debt because the U.S. Treasury market is the bedrock of our financial system domestically and globally, and defaulting is going to cause lasting damage to the credibility of the United States with investors and in financial markets around the world.
But as you say, the ramifications are not limited to the markets. It’s already beginning to cause some damage in the economy. It will hurt consumers. It will hurt small businesses.
And it’s not an exaggeration to say that even small distortions in the Treasury market can cost taxpayers tens of billions of dollars over many years. Consumers can be burdened with higher borrowing costs very quickly, whether they’re putting something on a credit card or they’re getting a mortgage. And for the small businesses trying to recover from the pandemic, this comes at a very critical time.
So, we just can’t wait until the last minute to resolve this. We are simply playing with fire right now, and our country has suffered so greatly over the last two years. The human and economic cost of the pandemic has been wrenching, and we don’t need a catastrophe of our own making to undermine the progress that is underway.
So, we really urge the administration and Congress to do what’s necessary to resolve the situation for the good of our economy, for the good of our country.
Thank you, Mr. President.
THE PRESIDENT: Well, thank you. And you make a very good point that we’re — God willing, I think we’re just about to begin to turn the corner again on the pandemic. And an awful lot of small businesses — tens of thousands of them — have acquired significant debt. We’ve provided significant relief as well, but it’s just — it’s just an incredibly complicated feature.
I’d like now, with her permission — I’d like to ask Adena Friedman, the CEO of NASDAQ, whether she’d be willing to give us her thoughts. And thank you for taking the time, Ms. Friedman, to talk to us.
MS. FRIEDMAN: Well, Mr. President, thank you very much for the opportunity to address the current situation.
We are starting to experience elevated volatility in the markets, which can be partially attributed to the uncertainty that’s been introduced by the delay in approving the extension of the debt limit. We would expect that a continued delay in extending the debt limit would further destabilize the markets.
And when we consider the broader economic costs of the uncertainty and certainly of possible default, we would, as Jane mentioned, see higher borrowing costs for consumers and small businesses, as well as delays in much-needed payments to major social programs, such as Social Security and Medicare.
So, when we look at this, these delays and certainly a default would mean that hardworking Americans will ultimately bear the burden.
So, as you mentioned, the — extending the debt limit simply allows the payment of obligations that have already been made by the U.S. government. Therefore, voting to extend the debt limit is an important bipartisan action to reinforce the full faith and credit of the United States. And we urge — we urge action as quickly as possible.
So, thank you.
THE PRESIDENT: Let me ask you the DEFCON 10 question: If we don’t — if we default, even for a day or two, what do you think the impact on the market will be?
MS. FRIEDMAN: I think that we would expect that — and investors really just don’t handle uncertainty well. And I think that investors and — and certainly, as we know, there are hundreds of millions of investors that are involved in the markets today that have put their hardworking — their hard — their hard-earned savings into the markets, and we would expect that the markets will react very, very negatively if we actually get to a point of a DEFCON 10 type of situation with a default.
THE PRESIDENT: What does that do to people’s retirement accounts?
MS. FRIEDMAN: Yeah, I think we have to realize that well over half of the adult Americans have money in the stock market, either directly or indirectly. And so those savings accounts, those retirement accounts, the pensions, they’ll all experience a significant, sharp drop in their values, which of course makes them feel less certain about their ability to manage their lives and their savings and plan for retirement.
THE PRESIDENT: Well, thank you. (Laughs.) I don’t mean to thank you for the result, but thank you for explaining to people who are watching this how consequential this is.
You know, I see my old buddy Jamie Dimon up there at JP Morgan. Jamie — excuse me for calling you Jaime — Mr. CEO, it’s good to see you.
Why, from your perspective, do we need to raise the debt limit immediately, before October 18th?
MR. DIMON: Mr. President, thank you. You can call me Jamie. That’s fine.
THE PRESIDENT: You can call me Joe. It’s fine.
MR. DIMON: And I appreciate you having us all here, Mr. President.
Anyway, there are five quick points I want to make. Number one is really a morality point: We all teach our children that we’re supposed to meet our obligations. I don’t think the nation should be any different.
Number two, we should never even get this close. There are huge economic costs already being borne by companies and lawyers trying to figure out what this means if something like this ever happens. It’s already affecting the stock market, et cetera, as you’ve heard from some of the folks here.
Number three, we should get rid of the debt ceiling. We don’t need to have this kind of brinkmanship every couple of years.
Number four, an actual default — an actual default would be unprecedented. We — the things we know that it would do are very bad. And it could be potentially far worse. The effects would be cascading. So, day one would be bad, but the cascading effects in the ensuing weeks could go anywhere from a recession to a complete catastrophe for the global economy. And I don’t know why anyone would take a chance like that.
And number five, America’s role in the world is essential. We are the bedrock — the American Treasury is the bedrock. Our credibility, it — we’re being watched right now by our allies and, unfortunately, our enemies. Our credibility is absolutely essential. Trust in America and the U.S. dollar and the financial system is critical to the world economy and eventually, actually, world peace.
So this is a time I think we should show American competence, not American incompetence.
THE PRESIDENT: Well, I’m glad you raised that last point, because when I got back from the G7, and subsequently with a number of virtual meetings with my colleagues and heads of state — I know Brian Moynihan knows about this as well — we are not only being measured in terms of our strength and our reliability, based upon the size of our military and/or the physical strength that we possess, but it’s on whether or not we can function.
There’s a great debate going on — and I’m not exaggerating this; all of you deal internationally. There’s a great debate going on on whether or not, in the 21st century — in the second quarter of the 21st century — can democracies function with things moving so rapidly.
And I can tell you a couple of the folks I’ve had a lot of — spent a lot of time with of late — Mr. Putin and Mr. Xi Jinping — they really believe that autocracies are the only way forward, because they can act quickly and decisively. It’s not a joke. And we’re seeing the effects of this around the world.
And I don’t know — it’s — it’s — I don’t know — it’s understandable why the average American wouldn’t understand what the consequences of this will be for American security and the willingness of other countries to follow our lead.
We have always led the world not just by the example of our power, but the power of our example. And that’s going to be called into severe question. I mean, for real. For real. And it has consequences that are cons- — real.
What does — you know, Jamie, what does “further delay” mean for a company like yours and the family you serve, if we just — even if we just go on right up to the brink?
MR. DIMON: When we start on Monday, we’re going to start reviewing all our contracts, repo, collateral requirements. There will be huge demands of people selling treasuries, wanting financing to treasuries. Interest rates will start going up. It will get worse as we get close to the brink. And as you said, it’ll hurt not big companies — and we won’t — don’t worry about that; we do worry about that it hurts the average American, and we don’t want that.
THE PRESIDENT: Well, I thank you. We’re going to get to everybody, but I’m going to yield to the Director of the Office of Public Engagement, former Chairman of the Black Caucus in Congress, Cedric Richmond. Cedric.
MR. RICHMOND: Thank you, Mr. President. I’ll just quickly yield to who — your great Treasury Secretary, who is an expert on this, for comments on what she thinks the ramifications are and where we’re headed.
So, with that, Secretary Yellen.
SECRETARY YELLEN: Thank you, Cedric. Thank you, Mr. President. And let me thank the business and community leaders who have joined us here today. I wish we could be meeting to discuss another topic: finding solutions to climate change or how to better invest in the future of our economy. But the urgency of the debt limit situation demands immediate attention. And I want to be clear about my position.
First, this is an urgent matter. It must be resolved immediately. Treasury will exhaust its extraordinary measures if Congress has not acted to raise or suspend the debt limit by October 18th.
After that point, we expect Treasury would be left with very limited cash that would be depleted quickly. And as we’ve seen in the past, and as this group knows, even delaying action can cause harm to business and consumer confidence, raise borrowing costs, disrupt financial markets, and cause a downgrade of the U.S. credit rating.
Second, let me be clear: This would be a catastrophic outcome. And this catastrophe would occur on two dimensions. The first relates to the financial system and macroeconomy.
If Congress does not take action to raise the debt limit, Treasury’s cash balance will reach an insufficient level to pay the nation’s bills and American would default for the first time in history. And default will call into question the full faith and credit of the United States.
Our country would likely face a financial crisis, causing interest rates to rise quickly and restricting access to credit. Our fragile recovery would be thrown into reverse. We would likely experience a recession, millions of jobs would be lost, and the pain would endure well past the resolution of the crisis.
The second catastrophe would be borne by all the Americans who directly receive any sort of payment from the federal government. Every Social Security beneficiary, every family receiving a Child Tax Credit, every military family waiting for a paycheck, or small-business owners receiving a federal loan: They’re all at risk.
Millions are without sufficient savings to forego an expected check. And for these households and businesses, the impact would be devastating.
To take one heartbreaking example, millions of seniors who depend on Social Security for their support would have to make awful choices, such as deciding whether to pay rent or buy groceries. And the same goes for parents of young kids expecting a child tax payment.
Hopefully it goes without saying: This is not only bad for people, it’s equally devastating for American companies.
For decades, our country has earned a reputation for being a welcoming and a reliable place to do business. We respect the rule of law. We honor our debts. And this reputation has benefitted us in many ways, including the ability to keep interest rates low and for the dollar to serve as the world’s reserve currency.
Ultimately, these benefits have helped us lead in the world economy and become a more prosperous nation. And yet, today, we are staring into a catastrophe in which we surrender this hard-earned reputation and force the American people and American industry to accept all the pain, the turmoil, and the hardship that comes with default.
It’s unnecessary, and it must be avoided at all costs. Congress must address the debt limit immediately.
Thanks. And I look forward to continued conversation.
1:27 P.M. EDT