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Nobody is a winner if we default on debt

The discussion of the nation’s debt ceiling and talk of a potential default on U.S. debt obligations is not just an issue for Wall Street. In fact, it will have serious implications for those of us on Main Street. As a community banker in Little Valley, I am keenly aware of how changes in interest rates and cost of capital affect lending to individuals and small businesses in Western New York.

So, it’s in no one’s interest to be promoting a default on our debt or even fueling the flames of a potential default. To ensure our modest economic recovery does not unravel, we must not default on our obligations.

But the negative impact of a default, and even the perception that the United States might default on its obligations, affects everyone. For starters, a default would devalue U.S. Treasury securities – highly conservative and liquid investments backed by the full faith and credit of the United States. For community banks like mine that utilize these government-backed bonds, devaluation would harm our capital levels and put local institutions and lending ability in our communities in jeopardy. Of course, it wouldn’t stop there, with untold damage to consumer confidence, the stock market, the value of the Wall Street dollar, interest rates and more.

A robust political debate on appropriate federal spending levels is fair enough. However, there is nothing to be gained from this overheated default talk, certainly not for our global, national and local economies. It’s time for all sides to turn off the rhetoric on defaulting on our debt before it is our economic recovery that goes up in smoke. Default on our national debt would have no winners.

My mission, as a community banker, is to stay out of the political cross-hairs. Yet my point is that Washington’s actions (or inactions) have real consequences to real people and small businesses throughout our great country.

Salvatore Marranca

President & CEO

Cattaraugus County Bank

Little Valley