Bank of America CEO Brian Moynihan on Monday said the firm is preparing for the U.S. to default on its debt after surpassing its borrowing limit last month.
Lawmakers are locked in talks about whether to lift the debt ceiling, with Republicans insisting on spending cuts before a deal to raise the limit is struck, and economists are warning of financial crisis if a default does occur.
“We have to be prepared for that, not only in this country but in other countries around the world. You hope it doesn’t happen, but hope is not a strategy — so you prepare for it,” Moynihan told anchor Poppy Harlow on “CNN This Morning,” noting the company is preparing as it would “in a natural disaster.”
The U.S. hit its borrowing limit of around $31.4 trillion in January, and Treasury Secretary Janet Yellen has since been using “extraordinary measures” to help the government pay its bills, a fix expected to last until sometime this summer.
The White House and many Democrats are pushing to raise the borrowing limit quickly, while Republicans are pressing for spending cuts as a condition to raising the ceiling. If lawmakers don’t take action to lift the debt ceiling, the country could default for the first time in its history.
Moynihan, who runs the nation’s second-largest bank, said there’s value in lawmakers debating across the aisle over what to do about the national debt but said “everybody has to” batten down for a potential default.
“The idea is not to shut down the government. The idea is to have a strong discussion about how high the debt should be. We had to put on a lot of debt in the last couple of years to overcome the pandemic drag on the economy,” the CEO said.
“Administrations from both sides of the aisle, so to speak, did that. At some point we have to figure out how that works in the future, but right now we’ve gotta get past the issues of just getting through the technical structure,” he said.
Yellen on Monday insisted that “every responsible member of Congress” should agree to raise the debt ceiling to avoid the “catastrophe” of a default.
“America has paid all of its bills on time since 1789, and not to do so would produce an economic and financial catastrophe, and every responsible member of Congress must agree to raise the debt ceiling,” Yellen said on ABC’s “Good Morning America.”
The Treasury secretary has said she’s “nervous” that defaulting on the debt could put the U.S. economy in a tailspin since the federal government would be unable to spend money and would likely cause financial crisis.