Top bankers pile on pressure as US default date nears

THE CHIEF executives of some of the US’s largest financial institutions wrote to President Barack Obama and members of Congress yesterday, five days before the US may default on its $14.3 trillion debt, pleading with them to make a deal this week.

“The consequences of inaction – for our economy, the already struggling job market, the financial circumstances of American businesses and families, and for America’s global economic leadership – would be very grave,” warned the letter, which was signed by Brian Moynihan of Bank of America, James Dimon from JP Morgan Chase and John Strangfeld of Prudential.

But leaders on Capitol Hill appeared headed for a showdown last night over the Bill proposed by the Republican leader of the House of Representatives, John Boehner. Yesterday morning, Mr Boehner convened the House Republican Conference to read them the riot act.

Most of the 87 Republican freshman representatives are affiliated with the ultra-conservative Tea Party, and up to two dozen were expected to oppose the Bill, which needed 217 votes to pass. There are 240 Republicans in Congress. Mr Boehner was given a standing ovation after telling Republicans to “get your ass in line”. Once the House voted, the Senate “will have no more excuses for inaction”, Mr Boehner told a news conference.

If the Boehner Bill did not pass, it was because the far right of his party do not believe the debt crisis was real.

“I do not believe for one moment that we will lose the full faith and credit of the US,” representative Michele Bachmann, a Republican presidential candidate and the head of the Tea Party caucus, told the National Press Club.

She said she could not vote for the Boehner Bill because she opposed raising the debt ceiling under any circumstances.

Joe Walsh, a freshman Representative from Illinois, has become a frequent guest on television news programmes since he posted a video accusing President Obama of lying about the debt ceiling. “You know darn well that if August 2nd comes and goes, there’s plenty of money to pay off our debt and cover all our social security obligations,” he says in the video.

The president’s press secretary Jay Carney said Mr Boehner’s legislation was doomed, even if it passed in the House last night. “There is no question that this Bill is a political act that has no life beyond its current existence in the House . . . It ain’t going anywhere in the US Senate,” Mr Carney said.

The main difference between the House Bill and a plan proposed by the Democratic Senate majority leader Harry Reid is that Mr Boehner insists on raising the debt ceiling in two phases.

Mr Reid was poised to act immediately after the House vote last night, though it was not clear whether he would chose to infuriate the Senate’s 47 Republicans by holding back the House Bill, stage a quick vote which was likely to fail, then substitute his own Bill, or draft a a combination of the two Bills with Republican Senators.

A compromise Bill could reach a Senate vote tomorrow.