The markets did not respond kindly to President Barack Obama’s press conference Tuesday.
The president told reporters at the White House that he was “nervous” about the possibility of default. Shortly afterward, the Dow Jones Industrial Average closed down 159 points on the day — a drop just over one percent — and Nasdaq dropped two percent. The Standard & Poor’s 500 was down 1.2
At the press conference the president said that a failure to come to terms with Congress on the debt ceiling would be catastrophic. He warned that, “At some point [Treasury] emergency powers run out, and the clock is ticking.” (Related: Obama again attacks Republicans: ‘I’m not budging‘)
So far Wall Street has not completely gone into panic mode, but critics have charged the president with taking the unlikely step of talking down the markets as a bargaining tool with House Republicans. confidence.
Last week, Obama warned investors that they should not remain calm during the government shutdown and raised the prospect of default.
He said, “I think this time’s different. I think they should be concerned. … When you have a situation in which a faction is willing potentially to default on U.S. government obligations then we are in trouble. And if they’re willing to do it now, they’ll be willing to do it later.”
A statement released by the Treasury Department also warned investors of economic doom if the impasse with congressional Republicans carried over to the debt limit. If Congress fails to raise the debt ceiling, the report says, “It could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth.”
The Treasury Department added that the continuing gridlock could potentially result in a financial crisis that paralleled that of 2008 or “worse.”
Treasury Secretary Jacob Lew echoed the president’s talk of looming economic despair last week when the markets were closing high, saying that the market’s relative calm about the budget debate “is a bit greater than it should be.”
Additionally, Gene Sperling director of the White House’s National Economic Council told Bloomberg News last week that, “There is a false sense of complacency among some in the market that somehow things will be always solved at midnight.”
“That’s simply scaring the marketplace,” Kentucky Republican Sen. Rand Paul protested. “We have never defaulted, we will never default, and there’s not even a reason to default because we have plenty of revenue that comes in every month to pay our interest payment.”
The debt ceiling will not be raised by the October 17 deadline unless Republicans and Democrats reach an agreement.
He told reporters that he was willing “to talk about anything” as long as Republicans reopened the government first. The House has passed various appropriations bills to fund parts of the government.
“At times like this the American people expect their leaders to sit down and have a conversation. I want that conversation,” House Speaker John Boehner retorted.
“What the president said today is, if there’s unconditional surrender by Republicans, he’ll sit down and talk to us. That’s not the way our government works,” Boehner concluded.
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