May 10, 2011
A front page Washington Post article included an assertion from Roger Altman, who is identified as “a private-equity investor who served in the Clinton Treasury Department,” that defaulting on the national debt would be the “financial equivalent of suicide.”
It is worth noting that Wall Street would be especially hard hit by a debt default. While a default would almost certainly lead to a severe financial crisis, even worse than the one in the fall of 2008, the rest of the economy would most certainly recover. We would have the same capital stock, infrastructure, state of technical knowledge and skilled labor force after the crisis as before.
However, the Wall Street banks would almost certainly not recover. They would almost certainly end up in bankruptcy. Their successors would probably never be as powerful in international finance as the current group of institutions. For this reason, Altman and other Wall Street financiers have far more to fear from a default than does the rest of the country. It would have been useful to include a wider range of perspectives on the impact of a debt default.
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