In an unusually blunt letter, Senator Orrin Hatch (R-UT) warned that the United States could face more debt crises and credit-rating downgrades in the future.
And unlike many of his fellow Republicans in the Senate, who argued that America defaulting on its debt would have little real-world effect, Hatch believes that another crisis could have devastating impacts for the economy.
“The consequences of further ratings downgrades would likely be significant, and could include runs on money market funds, disruptions in the tri-party repo market, and precipitous increases in borrowing costs for all Americans,” Hatch wrote in a letter to Treasury Secretary Timothy Geithner. “Those developments could lead to more bailouts, special lending facilities, and other ‘backstops’ observed during the recent financial crisis.”
The letter is also direct in its criticism of the way Geithner handled the last crisis. The senator says the treasury leader of being “elusive” in his responses to Hatch’s requests for information on how much money the government actually had, and accuses Geithner of being more forthcoming with JP Morgan Chase CEO Jamie Dimon about the true nature of the crisis than he was with Congress.
“Some of my inquiries seem to have simply been ignored,” Hatch wrote. “Perhaps Wall Street has learned more than I have.”
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