Mike Bloomberg: U.S. Default Would Be Catastrophic

New York City Mayor Mike Bloomberg is succinct and blunt regarding his evaluation of the impact the a U.S. Government default on the financial system: it would have a catastrophic effect on the nation's financial system, and also represent a huge setback to New York City.

America's good name and credit are just too important to be held hostage to Washington gridlock, and I hope that in the end cooler heads will prevail and an agreement will be reached quickly, Bloomberg, a political independent, said in a statement released Wednesday, Reuters reported.

Bloomberg added that a default would also take a serious toll on our economy, and that at a time when the nation is still trying to recover from the deep recession.

Bloomberg has ample experience in financial markets. A former equities trader, he founded Bloomberg L.P., a financial news and information services media company, and a leader in financial news. He currenly owns an 88 percent stake in Bloomberg L.P. He was first elected mayor of New York City in 2001.

Congressional Republicans and President Obama are at loggerheads over how to cut the budget deficit as part of a package to raise the nation's debt ceiling.

Republicans argue that Congress should substantially cut government spending to cut the budget deficit. Meanwhile, Democrats insist that revenue increases must be a part of the talks for any meaningful and enduring deficit reduction to occur.

On Aug. 4, the U.S. Treasury Department is due to pay off $30 billion in maturing short-term debt. In theory, the United States could prioritize debt payments, but U.S. Treasury Secretary Timothy Geithner warned lawmakers in Congress that the prioritization tactic would still cause investors to shun U.S. Treasury securities, commonly known as Treasuries.

Geithner has also repeatedly underscored that failing to raise the debt ceiling will have no constructive outcomes for the nation's fiscal condition, the task of deficit reduction, and U.S. and global stock and bond markets.