Top bankers warn of dire consequences if US defaults

Three of the world's most powerful bankers warned of terrible consequences if the US defaults on its debt, with Deutsche Bank chief executive Anshu Jain claiming default would be "utterly catastrophic".

"This would be a very rapidly spreading, fatal disease," Jain said on Saturday at a conference hosted by the Institute of International Finance in Washington. "I have no recommendations for this audience...about putting band aids on a gaping wound," he said.

Jain, JPMorgan Chase Chief Executive Jamie Dimon and Baudouin Prot, chairman of BNP Paribas, said a default would have dramatic consequences on the value of US debt and the dollar, and likely would plunge the world into another recession.

Dimon warned that the US needs to avoid defaulting on its debt, saying the possible repercussions are unfathomable.

"You don't want to know," Dimon said when asked what would happen if the US is forced into default because Congress did not raise the country's borrowing limit. "It would ripple through the world economy in a way that you couldn't possibly understand," he said at a discussion held by the Institute of International Finance, a leading forum for the world's banks.

He said it would shock the money market, where trillions of dollars in cash are invested in ostensibly top-quality securities like US debt based on expectations that the borrowers will not default. "You don't know the ripple effect of that through money-market funds," stressed Dimon, head of the largest US bank by assets. "The money markets are the most fickle markets in the world, they're like a rabbit."

Dimon was speaking as the White House and congressional Republicans remained deeply at odds over passing a budget and raising the US debt ceiling, a move needed to ensure the government can continue to pay its bills.

The US Treasury has repeatedly warned that as soon as October 17 it will be short of cash and forced to default on its obligations.