SEC chair warns U.S. debt default would shock markets

Securities and Exchange Commission chairman Gary Gensler warned Congress Tuesday that a breach of the U.S. debt ceiling could create significant volatility and disruption in financial markets as lawmakers continued to disagree on how to avoid national bankruptcy.

Gensler – the leading US regulator for Wall Street – said at a House Financial Services Committee hearing that failure to raise Washington’s credit limit would create uncertainty for banks, mortgages, auto loans and other financial instruments that rely on US Treasury bills are. The federal government borrows money to cover its businesses and debts by issuing treasury securities to investors.

“I think we would be in very uncharted waters,” said Gensler, noting that treasuries are the foundation of US capital markets. “Although we don’t know for sure, we would have significant volatility in the markets and some breaks in the system.”

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