Companies wake up to threat of U.S. default
Man despairs at his financial situation
Kai Ryssdal: If the Treasury does start missing debt payments come Tuesday, it's not just the government that's going to feel it. Nobody knows exactly how this whole thing's going to play out -- seeing as how it's never really happened before -- but you can bet the private sector's more than a little uptight, too.
There are comparisons being made to the financial crisis, with credit markets grinding to a halt. And we all know how that turned out. So companies both large and small are trying to figure out how much to worry and what they can do about it anyway.
Marketplace's Jeff Horwich reports.
Jeff Horwich: More than a dozen companies declined to comment for this story. After all, why remind their shareholders what next week might have in store? If the government defaults, the interest rate on U.S. treasury bonds is bound to rise, lifting other interest rates with it. Long story short:
Jim Kaitz: This causes a disruption in the access to credit and also a huge amount of uncertainty for corporations.
Jim Kaitz is president of the Association for Financial Professionals. He represents the people who balance the books at some of America's largest companies. And last week, he took their pulse on the federal debt ceiling debate.
Kaitz: Fifty percent in our people that responded to our survey said they're not worried. But the other 50 percent said they were, and that's a pretty significant number. And some of the things they would do in that instance were draconian.
Companies concerned they won't be able to borrow come Tuesday are saving cash now. That means postponing investments in new equipment, and certainly not hiring. But just because companies are planning for the worst does not mean they're expecting it. At the Ohio Chamber of Commerce, government affairs director Linda Woggon says most members are keeping the faith.
Linda Woggon: I think everyone understands that it's a serious issue. But it's one that we've faced many times in our country. And I think, ultimately, there will be a way that legislative leaders and the president can come together and find a way to deal with it.
Yes, but how? Business leaders say it's not just getting past Tuesday: Any short-term fix just prolongs uncertainty -- giving them little incentive to loosen up with the cash.
I'm Jeff Horwich for Marketplace.