Wall Street Shows Calamity Fatigue as Potential U.S. Debt Default Looms

By the decorous standards of the office of the secretary of the Treasury, Jacob Lew was lighting his hair on fire to get the nation’s attention. “If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history,” Lew wrote in a Sept. 25 letter to Speaker of the House John Boehner (R-Ohio) about the possibility the country would default on its debt in just three weeks. “The results could be catastrophic,” he added. The previous day, at a conference in New York, Lew had warned investors that they were acting entirely too calmly amid a crisis.

How did the markets respond? With yet more calm. Stocks in the Standard & Poor’s 500-stock index lost just 0.2 percent on Sept. 25, and the value of U.S. government debt—the asset class on the verge of default, as Lew was reminding the public—actually rose.