Jew Corrupter Summers: Panic Over Default Would Be Worse Than Lehman

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Panic Over Default Would Be Worse Than Lehman

By Juliann Francis - Jul 17, 2011 12:00 AM ET

Summers to Join Venture Firm

  Larry Summers, former U.S. Treasury Secretary, speaks during a session on the second day of the World Economic Forum Annual Meeting 2011 in Davos, Switzerland. Photographer: Tomohiro Ohsumi/Bloomberg

A U.S. debt default would cause panic throughout the financial system and long-term uncertainty, former Treasury Secretary Larry Summers told CNN.  

"It seems to me an unthinkable financial risk to take," Summers said in an interview on today's "Fareed Zakaria GPS" program. It would cause "a cascade that makes Lehman Brothers look like a very small event."

The bankruptcy of Lehman Brothers Holdings Inc. (LEHMQ) in September 2008 was the biggest in U.S history and was followed by a collapse of credit markets and a 43 percent decline in the S&P 500.

In 16 days, the U.S. will begin to default on its debt obligations unless Congress and President Barack Obama can agree on a deal to raise the debt ceiling. Obama has been trying to break an impasse over whether to include cuts in entitlement programs and tax increases in the deal.

Summers said a potential default makes him worry about "runs on banks, runs on money market funds," exchanges facing "the prospect of collapse, institutions that had been built over decades" being "swept away."

"The ability to carry on routine financial business -- to clear checks, to pay bills, to meet obligations would be lost," he said.

"It would be a totally self-inflicted cataclysm," he said. "There's no question the United States can meet its obligations. This idea that somehow that we cannot pay because we're having a political fight over how to handle the spending and taxing" is "democracy functioning in the worst possible way," he said.

To contact the reporter on this story: Juliann Francis in Washington at http://www.bloomberg.com/news/2011-07-1 ... thers.html

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Aaa Credit Rating

Should the U.S. government lose its top Aaa credit rating following a default, at least 7,000 top-rated municipal credits would have their ratings cut, Moody's said in a report last week. Top-rated securities with no direct links to the national government would also be reviewed for similar action, the New York-based company said.

An "automatic" downgrade affecting $130 billion in municipal debt directly linked to the U.S. would follow any reduction in the federal level, Moody's said.

U.S. states "are in a fragile state of recovery" and "can ill-afford" the effects of a default, Gregoire said on July 15.

"It's time to put this issue behind us and get on with the issue confronting every American, which is, 'Do I have a job and will I have a job tomorrow,'" Gregoire said in a press conference.

To contact the reporters on this story: Amanda Crawford in Salt Lake City at tjones58@bloomberg.net

http://www.bloomberg.com/news/2011-07-1 ... obama.html