Top U.S. bankers warn against prioritizing interest payments: WSJ

[grantcart]

Source: Reuters

(Reuters) - Top U.S. bankers have warned the Obama administration and Republican lawmakers that any move to pay interest on debt before obligations such as Social Security and payments to veterans would pose severe risks to financial markets and the economy, the Wall Street Journal reported.

Some lawmakers think prioritizing interest payments would placate bond investors if the government breaches its borrowing limit, the Journal said.

However, heads of the nation's largest financial institutions told the officials in meetings that prioritizing some payments would create insurmountable uncertainty for investors, drive up borrowing costs and disrupt markets, the Journal said, citing people familiar with the meetings.


Read more: http://finance.yahoo.com/news/top-u-bankers-warn-against-085655481.html

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This is the US banking industry calling Rand Paul an idiot:

http://www.washingtonpost.com/blogs/post-politics/wp/2013/10/06/rand-paul-its-irresponsible-of-obama-to-talk-about-default/

"I think it's irresponsible of the president and his men to even talk about default. There's no reason for us to default. We bring in $250 billion in taxes every month. Our interest payment is $20 billion. Tell me why we would ever default," Paul said on NBC's "Meet The Press." "We have legislation called the Full Faith and Credit Act, and it tells the president you must pay the interest on the debt. So this is a game."

[Fearless]

1. Who the hell's idea was this??

Oh right. My bad.

[TheMastersNemesis]

2. I Have Been Saying That The GOP Will Stop Social Security Checks And Now Vets Checks.

Rand Paul and other tea baggers are now saying that we pay the interest first after default and THEN take what is left to run everything. So seniors who hate government programs won't get their Social Security checks. They would be down the list from the DOD, Homeland Security, CIA, FBI and security forces.

Bankers are saying that a rise in interest rates could take all the income coming into the treasury.

[freshwest]

10. Rand is definitely saying that. Starve them out. Or give them a pittance, eliminate the ACA,

Medicare, Medicaid, DOE, EPA, etc. The only persons being padi would be their enforcers, like private armies and certain groups to provide them wha they need. This is Fascism 101.Americans should be calling for his head on a platter. But he's abroad while spewing this. and he'll do fine just like Romney, etc.

[Kelvin Mace]

3. People need to realize that default will mean

massive cuts or an outright end to:

1) Social Security
2) VA Benefits
3) Medicare/Medicaid
4) Food stamps
5) WIC

And the GOP is OK with this. This is their wet dream.

[madrchsod]

4. just think of this.... there are people who actually believe what he said

i think those folks should give up their ss and medicare to pay down the debt.

[grantcart]

13. I don't think they should be trusted with a driver's license.

[beerandjesus]

5. Appalling that they even feel the need to dignify that....

[Crowman1979]

6. Yet no mention of the $500+ BILLION used to pay for defense.

Gotta have that money ready to defend out business interes......I mean freedom.

[warrant46]

7. Yes Freedom is on the March

[Igel]

8. Yup.

Because we all know that Social Security and other entitlements, coupled with bond payments, make up 100% of tax proceeds. /sarcasm

Oddly, all the news was how low the deficit had become. If the deficit is really low, that means there's not a huge shortfall that needs to be prioritized so low that revenues don't cover it.

Problem is that the deficit for 2013 will be about $900 billion while discretionary spending is only about $1.25 trillion. In 2008 a deficit far less than half of the 2013 deficit was classed as "unsustainable" and unnecessary--job creation was about the same, but unemployment was 3 points lower. We're borrowing for 3/4 of discretionary expenses. Zero out the DOD budget and we're still about $300 billion in the hole.

Of course, that deficit number also includes exceptionally large repayments from Freddie and Fannie. Those aren't actual ongoing revenues. Without them the deficit would be over $950 billion.

Prioritizing could work, very short term. But after a few months it, too, would be unsustainable.


Nice to pair this with the breaking news article saying that adult Americans rank 3 from the bottom in math skills, dontcha think?

[Stallion]

9. 2013 Annual Budget Deficit Projection (ending 9/31/13)

has been adjusted dowm much lower than 900 Billion-more like less than 700 Billion

[lovuian]

11. Does this mean civil servants won't get their

pensions also?

[Diego_Native 2012]

12. Bad idea for the markets...not to mention

it would result in massive demonstrations in the streets. Nothing like a good march from the American rabble to get the attention of the international markets.