Debt ceiling ‘game of chicken’ will terrify markets -Bain Capital’s Lavine

A woman wears a mask near the New York Stock Exchange (NYSE) in the Financial District in New York, U.S., March 4, 2020. REUTERS/Brendan McDermid

By Nell Mackenzie

LONDON (Reuters) – If the U.S. Congress becomes mired in an argument on whether to raise the debt ceiling, this will hurt the U.S. economy and rattle financial markets, a top executive at private equity firm Bain Capital said on Tuesday.

    “The debt ceiling is a real risk that will come to a point where it will terrify markets, because it is a wild game of chicken,” Jonathan Lavine, co-managing partner at Bain Capital, which manages $160 billion in assets globally, told an event.

The U.S. government on Jan. 19 came close to its statutory borrowing limit. The Treasury Department warned that its extraordinary cash management measures could only allow the government to pay all its bills through early June, at which point the world’s biggest economy could be at risk of failing to meet its obligations, including on its debt securities.

House Republicans want to use that critical deadline to force spending cuts, while the White House has said there should be no negotiations over lifting the debt limit. Republicans’ narrow House majority has given outsized influence to the party’s most hardline voices.

Expectation of a recession has made markets more sensitive to unanticipated risks, Lavine told attendees at a London School of Economics (LSE) conference.

At Bain Capital – which as a private equity firm is involved in taking companies private or buying large parts of firms in mergers and acquisitions deals – Lavine said he had seen instances this year where distressed companies looking for a buy-out solution had pro-actively approached Bain Capital in order to avoid the more costly option of bankruptcy.


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