WASHINGTON – An unprecedented worldwide economic downturn could result if Congress allows the nation to default on its debts, M&T Bank’s CEO and Chairman Robert G. Wilmers said Friday.
Asked if such a collapse could happen after a U.S. government default, Wilmers said: “It’s entirely possible.”
Wilmers’ comments came in an interview with The Buffalo News that followed a meeting he had with the Buffalo bank’s Washington-area clients, where he warned them of the economic dangers of the current congressional stalemate.
If Congress were to fail to raise the debt ceiling and leave the nation unable to pay its bills, the ramifications would be “very, very serious,” Wilmers said in the interview.
“The dollar is the currency of the world. It’s the gold standard, almost,” he said. “I think if the world loses confidence in the dollar, it’s just terrible. It’s disastrous.”
And that’s just the worst-case scenario that Wilmers spelled out on his trip to Washington. Even if the nation avoids default, the economic ramifications of the 11-day-old government shutdown are severe, he warned.
At M&T, for example, 129 small-business loans totaling $24 million are not being processed because they’re backed by the Small Business Administration, which is shut down and cannot process them. The same thing is happening at banks across the country, starving small businesses of needed funds, Wilmers said.
Then there’s the accumulated evidence of the damage wreaked by a similar congressional showdown over the debt ceiling in the summer of 2011.
In his presentation to clients, Wilmers lamented “the political chicanery surrounding the debt ceiling” and noted that the damage the earlier conflict produced came clear in M&T’s surveys of its clients.
In February 2011, before the debt ceiling crisis and Standard & Poor’s downgrade of the U.S. credit rating, 57 percent of clients surveyed by M&T said the economy was improving. By August of that year, after the debt-ceiling crisis and S&P downgrade, only 21 percent of those surveyed thought the economy was getting better.
Meanwhile, the number of respondents who said the economy was deteriorating jumped from 3 percent to 27 percent. “The numbers speak for themselves,” Wilmers said.
Wilmers blamed the stalemate on the refusal of Republican and Democratic leaders to build constructive working relationships.
He noted that former Senate Republican Leader Trent Lott of Mississippi told him that in the old days, the party leaders in the House would speak to each other every day more than the current leaders – Republican Speaker John Boehner and Democratic Leadery Nancy Pelosi – speak to each other in a year.
“That’s not healthy,” Wilmers said.