The U.S. government will shut down this weekend absent a last-minute funding deal from Congress, and that could lead to significant disruptions for stock and bond markets, according to the nation’s top securities regulator.
Securities and Exchange Commission Chair Gary Gensler said during a hearing before the House Financial Services Committee Wednesday that a government shutdown would force his agency to furlough roughly 93% of its staff, leaving him with a “skeletal” crew that would not be able to perform basic market oversight.
“The public won’t have somebody, really at full force, overseeing the market or companies that want to go public,” Gensler said Wednesday, adding that a shutdown could stop many public companies from issuing new debt or equity to fund their operations.
“I would say if a company were deciding to go public or raise offerings, they’d want to go effective before Friday if they’re ready to,” Gensler said. “If not, they might be in a sort of subliminal state where they can’t access the markets.”
The SEC would still be able to accept tips and complaints from the public, but won’t have the staff available to follow up on these issues, unless they relate to an emergency situation that presents and imminent and significant threat to the protection of property, Gensler said.
In response to a question on how the SEC would respond to “major disruption in the capital markets, operations and infrastructure during the shutdown,” Gensler said that “senior leadership would be there, but…we’d be down to a skeletal staff.”
Historically, U.S. stocks as measured by the S&P 500
SPX
have performed well during government shutdowns, according to a recent analysis by Brian Gardner, chief Washington policy strategist at Stifel.
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