Yellen plans to huddle with Wall Street bankers as default looms
Treasury said Yellen will talk with banking leaders to discuss the impasse over raising the government’s borrowing limit.
Treasury Secretary Janet Yellen will meet with top Wall Street bankers in Washington next week as the Biden administration and Republican leaders scramble to reach a deal to avoid a debt default.
Treasury said Yellen will talk with board members of the Bank Policy Institute, a lobbying group whose board is led by JPMorgan Chase CEO Jamie Dimon and includes Citigroup CEO Jane Fraser, to discuss the impasse over raising the government’s borrowing limit.
The meeting comes at a pivotal moment in negotiations, with both sides deeply divided and no clear path forward. President Joe Biden and top congressional leaders delayed a planned Friday meeting to discuss the debt ceiling but agreed to talk next week, a White House spokesperson said.
People close to the leaders of some of the largest banks — including JPMorgan, Citi and Goldman Sachs — say that up to now they had not received any direct outreach from Yellen. Neil Bradley, lead lobbyist for the U.S. Chamber of Commerce, said Wednesday he was “not aware of specific conversations” that she’s had with his members.
The Biden administration is often careful to keep Wall Street at a distance because large banks are unpopular with many Democrats. But industry executives say that with the so-called X-date approaching — when Treasury could run out of room to avoid default — they are eager to speak directly with the administration on possible paths forward to avoid a potential economic calamity.
The Biden administration brought top CEOs to the White House in 2021 to urge GOP lawmakers to lift the debt limit. With Congress divided and Speaker Kevin McCarthy (R-Calif.) now operating with a razor-thin majority in the House, many economists and financiers say the risk of a U.S. default — or a credit downgrade — is greater than in any period since 2011.
A Treasury spokesperson said Yellen — along with Deputy Secretary Wally Adeyemo — has spoken with Fortune 500 CEOs in the financial services and retail sectors over the past two weeks to hammer home how a protracted battle with Congress over fulfilling the federal government’s obligations to bondholders would damage the economy.
Next week’s meeting, along with a planned appearance by Yellen at a Washington summit hosted by a group that represents small and independent financial institutions, is an extension of those efforts.
The Bank Policy Institute, which represents large banks, declined to comment.
Despite their sway over markets, Wall Street has largely held off on direct engagement with policymakers in the debt limit fracas. But executives like Dimon and Fraser have warned repeatedly that a default would be disastrous. The research arms of several institutions, including Goldman Sachs, have also been sounding alarms about how little runway the U.S. has left before the X-date, which could come as soon as June 1.
In a television appearance on Bloomberg on Thursday, Dimon said his bank was doing weekly internal meetings in a “war room” to prepare for what could occur if Congress fails to act.
A group of investment bankers and asset managers led by Beth Hammack, the co-head of global financing at Goldman Sachs, warned policymakers that the prolonged stalemate has already “increased the debt burden to the American taxpayer,” in a letter released by Treasury shortly after Biden met with congressional leaders on Tuesday.
Some Democrats like Rep. Pramila Jayapal of Washington have said that business leaders need to step up the pressure on Republican lawmakers to get a deal across the finish line.
Still, Bradley — a former Hill staffer who advised then-Majority Leader Eric Cantor (R-Va.) during the 2011 debt ceiling fight — said he doesn’t expect that to happen until Biden and congressional leaders negotiate an agreement.
“The real question will come once there’s a deal — and how do we make sure that deal clears Congress,” he said.