Goldman Sachs Says Default “Manageable”

As the U.S. Government comes ever closer to defaulting on its loan obligations, investment bank Goldman Sachs says that the associated market risks will be “manageable,” according to reports.

Analysts at Citigroup interviewed top Goldman executives and prepared a note for investors based on what was said. “Management noted that they have run through various scenarios and implied the risk of a U.S. debt downgrade seems manageable, with the important caveat that there is always the possibility of more severe knock-on effects,” the analysts reported.

The report further notes that Goldman executives had not seen any extreme movement in the fixed-income market, despite a decline in equities. That suggested to the executives that the potential for default would have a greater impact on short-term investors than on institutional investors with long holding periods.

Goldman executives noted that banking agreements that use government debt as collateral are not dependent on the actual ratings of that debt and that investors were not questioning the ability of the government to actually pay its debts.