If the U.S. defaults on its debt, the JPMorgan CEO warned in a Thursday interview with Bloomberg TV, it would hit “contracts, collateral, clearing houses, and affect clients definitely around the world.”

Dimon expressed some hope that the U.S. would be able to negotiate a solution if markets begin to worry that a default might happen. “The closer you get to it, you will have panic” in terms of market volatility, he warned. And while “panic becomes something that’s not good,” he noted, “if it gets to that panic point, people have to react.”

Dimon revealed to Bloomberg that JPMorgan is convening a weekly “war room” to evaluate the effects of a U.S. default. He predicted that the group would start meeting more regularly if the standoff continues, moving to daily meetings by around May 21 and then to meeting three times a day if no solution is reached.

President Joe Biden and Congressional leaders met earlier this week to find a solution to the impasse over the debt ceiling. Republicans in the House of Representatives want deep spending cuts in exchange for letting the government borrow more money to pay its commitments, while the Biden administration has called for a debt ceiling increase free of other conditions before negotiating on spending. 

Biden and congressional leaders are scheduled to meet again next week. 

What is the debt ceiling?

Congress sets a ceiling on how much debt the U.S. Treasury can incur, and can pass legislation that increases the borrowing cap by a given amount. If the ceiling is reached, the Treasury is barred from borrowing more money to cover the spending obligations of the U.S. government. That would force the Treasury to stop paying for things the U.S. government has already committed to pay, leading to a default. 

White House economists warn that even a short default would lead to 500,000 lost jobs and a 0.6% reduction in GDP. 

As the U.S. approaches the ceiling, the U.S. Treasury can employ “extraordinary measures” to keep covering its spending obligations and give Congress more time to raise the debt ceiling. These include moves such as pausing some investments in savings plans for government workers and health plans for retired postal employees. The Treasury started conducting “extraordinary measures” in January, and estimates it could exhaust its options as early as June 1.

U.S. Secretary of the Treasury Janet Yellen has warned of the economic consequences of the U.S. default, calling it “an economic and financial catastrophe that will be of our own making” on ABC News on Sunday.

Yellen is reportedly calling CEOs to warn them of the debt ceiling fight’s consequences. On Bloomberg, Dimon refused to confirm whether he had spoken to Yellen. But the Treasury Secretary will meet with board members of the Bank Policy Institute, a lobbying group chaired by Dimon, next week.

Dimon told Bloomberg that he was concerned that a protracted debt ceiling fight would hurt the U.S.’s credit ratings, referring to a previous debate over raising the debt ceiling in 2011. After months of back-and-forth, the Obama administration and House Republicans agreed to raise the debt ceiling while cutting government spending, on the same day Treasury predicted it would exhaust its borrowing authority. Soon after, rating agencies Standard & Poor’s downgraded its rating for U.S. debt to “AA+.”

Banking crisis

JPMorgan’s CEO also referred to another source of economic angst in his interview with Bloomberg: the current crisis facing regional banks. 

Dimon, whose company recently acquired the failed First Republic Bank, said he wasn’t interested in buying another faltering financial institution. “We’re going to have a lot of blowback having bought [First Republic],” he said, even if “it was the right thing to do.”

“It’s a lot of work,” he said.