Jamie Dimon warns that panic will engulf the markets as the U.S. approaches debt default

CEO Jamie Dimon said Thursday that markets will be gripped by panic as the U.S. nears a possible sovereign debt default.

 

An actual default would be "potentially catastrophic" for the country, Dimon said in a televised interview with Bloomberg. Dimon said he expects the worst-case scenario to be avoided, however, because lawmakers will have to respond to growing concerns.

 

He said, "the closer it gets, the more panic there will be" in the form of stock market volatility and turmoil in Treasury securities.

 

Dimon joined a host of businessmen and administration officials making gloomy predictions about the consequences of failing to raise or suspend the U.S. debt limit and the world's largest economy defaulting on its bonds. Treasury Secretary Janet Yellen said the thought that the country could default must be "unthinkable" and would lead to economic disaster.

 

"If it gets to the point of panic, people would have to react, we've seen that before," Dimon said.

 

But "it's a really bad idea because panic becomes something that's not good," he added. "It could affect other markets around the world."

 

War Room

 

JPMorgan, the largest U.S. bank with about $3.7 trillion in assets, is preparing for the risk of a U.S. default, Dimon said.

 

Such an event would sweep across the financial world, affecting "contracts, collateral, clearing houses and affecting customers around the world," he said.

 

The bank's so-called "war room" used to meet once a week, he said, but after May 21 it will move to daily meetings and then to three meetings a day.

 

He urged politicians from both major U.S. parties to compromise and avoid a disastrous outcome.

 

"Please negotiate a deal," Dimon said.

 

Other banks

 

In a wide-ranging interview, Dimon said he has been talking to regional bank executives daily amid worries about the Silicon Valley Bank collapse in March. Last week, JPMorgan was the winner in a government-brokered auction to buy First Republic.

 

The regional banks are "pretty strong" and will have good financial results, but executives are worried about the bank attacks that led to the collapse of three companies, he said.

 

"I think we have to assume that the regional banking crisis will continue for a little while longer," he said.