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Securities and Exchange Commission (SEC) Chairman Gary Gensler has actually alerted that the U.S. Treasury defaulting on its financial obligation responsibilities “would have very significant, hard to predict, and likely lasting effects on investors, issuers, and markets alike.” Gensler worried: “We’ve already seen an effect in the pricing and liquidity of short-dated Treasury bills and continue to monitor for any additional tremors.”

SEC Chair Gary Gensler on U.S. Debt Default

The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has actually weighed in on the effect a U.S. default would have on capital markets as conversations of the U.S. defaulting on its financial obligation responsibilities warm up in Congress.

“I’d like to say a few words regarding the ongoing discussions in Washington around the debt ceiling,” the SEC chairman stated in his remarks prior to the International Swaps and Derivatives Association yearly conference Wednesday. Gensler warned:

If the U.S. Treasury as a provider were in fact to default, it would have really substantial, tough to forecast, and most likely long lasting impacts on investors, providers, and markets alike.

“In a word, it would make the Cyclone Roller Coaster at the 1933 Chicago World’s Fair look like a kiddie ride,” he worried.

The SEC chairman also clarified: “While we at the SEC have no direct role in those discussions, the outcome is directly consequential to each part of our mission: protecting investors, facilitating capital formation, and maintaining fair, orderly, and efficient markets.”

He included:

We’ve currently seen an impact in the rates and liquidity of short-dated Treasury expenses and continue to keep track of for any extra tremblings.

U.S. Treasury Secretary Janet Yellen exposed recently that the Treasury Department might not have the ability to pay all of the federal government’s expenses as early as June 1 “if Congress does not raise or suspend the debt limit before that time.” She also warned of “catastrophic” repercussions of the U.S. defaulting on its financial obligation responsibilities.

What do you think of SEC Chairman Gary Gensler’s cautioning concerning the effect a U.S. default would have on capital markets? Let us understand in the comments area below.

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