Top bankers urge Washington to avoid fiscal cliff

October 19, 2012

(Reuters) – Top financial industry executives urged the Obama administration and Congress on Thursday to stop automatic fiscal austerity measures from kicking in at year-end, but did not propose fresh ideas for replacing those harsh budget and tax measures.

“The consequences of inaction … would be grave,” members of the Financial Services Forum, an industry trade association, wrote to President Barack Obama and members of Congress in a letter released on Thursday.

The letter, signed by 15 top executives of some of largest U.S. and global financial services companies, points to rising concern that lawmakers will run out of time to seal a deal to avoid sharp tax increases and spending cuts.

With a presidential election leaving the political landscape uncertain, negotiations to avert what has become known as the fiscal cliff are not expected until after the ballots have been counted on November 6 – and that has made many nervous.

If unattended, the impact of the sudden tax hikes and spending cuts could be severe. Independent policymakers, including Federal Reserve Chairman Ben Bernanke, have warned that failure to avert the “fiscal cliff” would cause economic growth to contract sharply and hamper an already fragile recovery.


The White House said on Thursday that the outcome of the election will break the deadlock over the key sticking point – whether to raise taxes on those earning more than $250,000 – and that there will be time to prevent the crunch.

“The president is confident, we remain confident that we can address these issues,” White House spokesman Jay Carney told reporters traveling with President Barack Obama on Thursday.

“He said on a number of occasions that he is confident that since the electorate will have spoken on this issue, and will have endorsed the broad consensus that we need to take a balanced approach to these matters, that will compel Congress to move in that direction,” Carney said.

If the White House and Congress fail to prevent them, $1.2 trillion in across-the-board spending cuts would start to take effect on January 2 and tax cuts enacted under former President George W. Bush would expire on December 31.

Lawmakers set up the year-end deadline as a spur to achieve a broader deficit-reduction package, but failed to reach such a deal.

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