Stocks may have to crash if Congress is to resolve the debt ceiling crisis, Rep. Jim Himes, D-Conn., said., the former Goldman Sachs vice president and current member of the House Financial Services Committee warned that Congressional Republicans are too fixated on pursuing spending cuts, and only a market tumble will break the stalemate with their Democratic peers.
"Sadly, I think it's going to take that kind of market signal to wake my ideologically frenzied friends up and just say, 'Let's move on and do some real stuff,'" he said. He compared the situation to 2008's Troubled Assets Relief Program, a piece of legislation providing $700 billion to banks during the global financial crisis.
But despite earlier warnings that the bill was necessary to prevent a broader economic collapse, it still failed to get enough votes. In response, the Dow Jones Industrial Average sank 7% and the Nasdaq tumbled more than 9% as stocks lost $1.2 trillion in a day, causing lawmakers to pass the bill four days later.
"I fear that this ends the way the famous TARP, the Troubled Assets Relief Program, got passed in 2008. And that is when the markets finally say, 'You guys have got to stop screwing around,'" Himes said.