Brian Moynihan, CEO of Bank of America, expressed hope that lawmakers would sort out their problems because the market and the economy needed to stabilize, and noted that the country's debt default remained a possibility that could not be ignored.
And according to Arabiya.net, Moynihan said in statements to CNN: We have to be ready for this, not only in this country but in other countries around the world. We hope it won't, but hope isn't a strategy - so you have to prepare for it.
President Joe Biden may address the topic in his State of the Union address on Tuesday. US Treasury Secretary Janet Yellen has already warned Congress that the country could default on its fiscal obligations as early as June if the debt ceiling is not raised before then.
Yellen later said that there could be a global financial crisis if there is no agreement on debt limits. The Treasury is now taking extraordinary measures to keep the bills paid on time.
The recent drama over the debt ceiling has led to calls for the government to get rid of it completely. The argument is that political differences should not prevent the US from meeting its financial obligations.
Moynihan is not a fan of that idea: There should be an argument about how we make sure we live within our means as a country when asked whether or not the US should eliminate the debt ceiling.
financial leads
Congress has the financial leads. I would be cautious about trying to restructure the US Constitution, according to Moynihan. I think we have to make sure it works properly.
But he acknowledged that the government needs to spend a lot on various stimulus programs since 2020 due to the COVID-19 crisis, saying that the United States has had to take on a lot of debt over the past two years to overcome the pandemic's burden on the economy.
The economy has rebounded sharply from the depths of the short Covid downturn. So much so that inflation is now the biggest problem facing the country, and so is the Federal Reserve.
The Fed has raised interest rates aggressively over the past year in an effort to bring inflation down to target levels. Interest rate hikes are starting to bear fruit, but the US labor market is still shockingly strong.
The unemployment rate remained very low. Too low, Moynihan said, is one of the challenges the Fed faces.
moderate recession
With that in mind, Moynihan said, Bank of America still expects a mild recession at some point in the future. He argues that higher rates can be a drag on corporate profits, but the good news is that most people are still working, earning and spending well.
Moynihan does not seem overly concerned that any geopolitical tension between the US and China stemming from the recent spy balloon incident will have a lasting impact on the global economy.
He told that given China's importance in the global supply chain, it is in everyone's interest that no economic tensions escalate.
