Office of the Supervising Architect for the U.S. Treasury

• Convening war rooms, planning speedy bailouts and raising house-on-fire alarm bells: Those are a few of the ways the biggest banks and financial regulators are preparing for a potential default on U.S. debt.
• “You hope it doesn’t happen, but hope is not a strategy – so you prepare for it,” Brian Moynihan, CEO of Bank of America, the nation’s second-biggest lender, said in a television interview.
• What happens if a default occurs is an open question, but economists – including me – generally expect financial chaos as access to credit dries up and borrowing costs rise quickly for companies and consumers.
• But how do you prepare for an event that many expect would trigger the worst global recession since the 1930s?

Preparing for panic

• The meetings are likely to become more frequent as June 1 – the date on which the U.S. might run out of cash – nears.
• “I don’t think it’s going to happen — because it gets catastrophic, and the closer you get to it, you will have panic,” he said.
• That’s when rational decision-making gives way to fear and irrationality.
• The value of Treasurys is likely to plunge in the case of a default, which could weaken bank balance sheets even more.
• And a default would only make that problem worse, with close to 190 banks at risk of failure as of March 2023.

Keeping the financial plumbing working

• Financial industry groups and financial regulators have also gamed out a potential default with an eye toward keeping the financial system running as best they can.
• The Securities Industry and Financial Markets Association, for example, has been updating its playbook to dictate how players in the Treasurys market will communicate in case of a default.
• And the Federal Reserve, which is broadly responsible for ensuring financial stability, has been pondering a U.S. default for over a decade.
• Ultimately, Republicans capitulated and raised the limit one day before the U.S. was expected to run out of cash.
• If that happens, the government would have to use its cash on hand to pay back investors who hold maturing debt.

A self-imposed catastrophe

• Ultimately, I hope that Congress does what it has done in every previous debt ceiling scare: raise the limit.
• Going back to my original question, how do you prepare for such a self-imposed catastrophe?

• NEW YORK, April 17, 2023 (GLOBE NEWSWIRE) -- Ponce Financial Group, Inc., (the “Company”) (NASDAQ: PDLB), the holding company for Ponce Bank (the “Bank”), today announced that the Bank has been awarded a $3.7 million grant from the U.S. Treasury as part of the Community Development Financial Institutions ("CDFI") Equitable Recovery Program ("ERP") which aims to help CDFI's further their mission of helping low and low-to-moderate income communities recover from the impact of Covid-19.
• The U.S. Treasury indicated that the grant would be disbursed in June 2023 and its utilization would be subject to eligible activities and reporting in accordance with the ERP program.
• “There’s been a lot of talk lately about which banks are “systemically important” and I think that one just needs to read the purpose of this ERP program to understand that CDFIs like Ponce Bank are not just systemically important; we are critical to a huge swath of our society that isn’t supported by the traditional banking system,” said Ponce Bank CEO Carlos Naudon.
• He added, “We proved throughout the pandemic that Community Banks, CDFIs and MDIs are able to strategically deploy capital, where it’s needed most, both quickly and efficiently.

• AUSTIN, Texas, March 30, 2023 /PRNewswire/ -- How could international geopolitical conflict affect the finances of American consumers?
• With potential losses if the market nose-dives in the face of a global crisis, protecting your retirement is key.
• With potential losses if the market nose-dives in the face of a global crisis, Diehl says, "protecting your retirement is key."
• One strategy the former Mint Director recommends is owning precious metals.

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• – Craig Seitz, Senior VP & CFO of Crown Equipment
  Rura l Development Partners utilizes the NMTC Program to help organizations throughout the nation relocate and expand their operations in distressed rural communities.
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