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Reid: Congress must heed warnings that default risks global financial crisis



harryreid1-150x150-2775144-4823176WASHINGTON, D.C.– Sen. Harry Reid made the following remarks today on the Senate floor on Democrats’ efforts to cut the deficit and avert a default crisis. Below are his remarks as prepared for delivery:

There are some in the Republican Party who will not listen to the truth no matter who speaks it.

This is my opinion: if we allow this nation for the first time in its history to default on our national obligations, it will be not only a black mark on our reputation but also a massive financial disaster that will sweep the world into global depression.

But it is not my opinion alone. I have come to that belief by listening to the most respected voices in the business community. Default, they say, is a “risk our country must not take.”

And they’re not the only ones who believe that’s true.

The most respected bankers have also said it. JP Morgan Chase CEO Jamie Dimon said default would be “catastrophic.”

Investors have said it. Bill Gross, one of the world’s largest mutual fund managers, sent us a warning yesterday. He said “There should be no question at all. The debt ceiling must be raised and not be held hostage by budget negotiations. Don’t mess with the debt ceiling, Washington.”

Economists have also said it. Ben Bernanke, appointed by President Bush as chairman of the Federal Reserve, has said default would be a “major crisis” that would send “shockwaves” through the world financial markets. And yesterday he said failure to avert default would mean “huge financial calamity.”

Even other Republicans have said it. This is what Speaker Boehner said in April: “Not raising the debt limit would have serious – very serious – implications for the worldwide economy and jobs here in America.”

And – perhaps most telling of all – all three credit rating agencies have already sent warning shots across our bow.

Last night Moody’s cautioned us that America’s AAA rating was already under review for downgrade – with three weeks left until we miss our first payment. They cited the “rising possibility” that we will default. And they said that we could lose this crucial rating – which saves every American money every day – even before we miss a payment.

Standard & Poor’s has told Congress and business leaders that even if the U.S. keeps paying creditors, but delays Social Security checks or veterans benefits, it may cut our rating.

And Fitch Ratings has said a default would “threaten the still fragile financial stability in the US and the world as a whole.”

So why are some Republicans in Congress still saying that a first-ever default on our nation’s financial obligations would be no big deal?

When every financial expert, investor, business leader and banker in the country – and even every reasonable member of your own political party – is telling you the consequence of default would be catastrophe, it’s time to start listening.

Why? Because default won’t just roil the financial markets, push interest rates higher and tank the stock markets. It will affect every American’s wallet as well. Here is what will happen.

Social Security checks and veterans benefits and paychecks to our troops would stop. Some of the most vulnerable Americans would be placed at risk. Our promise to the men and women who protected this nation so bravely – and those who protect it today – would be broken.

Payments on our national debt would stop. American investments and retirement accounts could be decimated. Millions of Americans could lose their jobs.

Interest rates would rise, not only for the government, but for ordinary Americans as well. Those Americans will pay more for their mortgages. They will pay more to use a credit card or buy a car or finance a university education.

They’ll even pay more for their electric bills, groceries and gas. The spike in interest rates and the damage to the U.S. dollar alone could cost the average American family more than $1,500.

It would be the most serious financial crisis this country has ever faced. And it would come at a time when our economy can least afford it.

And in the long run, it would wind up costing the government trillions – a fact Republicans shouting about the debt fail to mention. Every 1 percent increase in interest rates will cost the nation $1.3 trillion.

With so much at stake, even Speaker Boehner and Minority Leader McConnell seem to understand the seriousness of this situation. They’re willing to negotiate in good faith.

Meanwhile, House Majority Leader Eric Cantor has shown that he shouldn’t even be at the table. And Republicans agree.

One House Republican told Politico: “He lost a lot of credibility when he walked away from the table … It was childish.”

Another Republican said Cantor is putting himself first. He said this: “He’s all about Eric.”

The time for personal gain and political posturing is over. It’s time to put our economy and our country first.

The risks we face are simply too great. But don’t take my word for it. More than 300 respected business leaders wrote to Congress this week to make it clear how serious this crisis really is.

“A great nation — like a great company — has to be relied upon to pay its debts when they become due,” they said. “This is a Main Street not Wall Street issue.”

Democrats are listening. It’s time for the irresponsible voices in the Republican Party that continue to deny the truth of this crisis to start listening as well.

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