Editorial: Time to Put Default Politics on Ice

The discussion of the nation’s debt ceiling and growing talk of a potential default on U.S. debt obligations is not just an issue for Wall Street. In fact, it will have serious implications for those of us on Main Street.  As a local community banker I am keenly aware of how changes in interest rates and cost of capital affect lending to individuals and small businesses in Grand Rapids and other northern Minnesota communities.

So, it’s in no one’s interest to be promoting a default on our debt or even fueling the flames of a potential default. To ensure our modest economic recovery does not unravel, we must not default on our obligations.

But the negative impact of a default, and even the perception that the United States might default on its obligations, affects everyone, even those of us in right here in Grand Rapids. For starters, a default would devalue U.S. Treasury securities—highly conservative and liquid investments backed by the full faith and credit of the United States. For community banks like mine that utilize these government-backed bonds, a devaluation would only harm community bank capital levels and put local institutions and lending ability in our communities in potential jeopardy. Of course, it wouldn’t stop there, with untold damage to consumer confidence, the stock market, the value of the U.S. dollar, interest rates and more.

A robust political debate on appropriate federal spending levels is fair enough.  However, there is nothing to be gained from this overheated default talk, certainly not for our global, national and local economies. It’s time for all sides to turn off the rhetoric on defaulting on our debt before it is our economic recovery that goes up in smoke.

Noah Wilcox, President & CEO

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