Could default risk put US in euro-zone doghouse?

Monday, 7 Oct 2013 | 12:55 PM ET
Washington's bitter battle continues
"We've saw a reversal of position over the weekend by Speaker Boehner," says John Podesta, Center for American Progress, discussing whether the Speaker is "being pushed" by the far right over the budget standoff. And Barry Knapp, Barclays, weighs in on the economic impact of a shutdown.

As the Treasury's Oct. 17 debt ceiling deadline approaches, the prospects of a default—however unlikely—could be devastating in Europe, John Podesta, White House chief of staff for Bill Clinton, said on Monday.

"If the European regulators decided their European banks need to stress test against their exposure to U.S. default and begin to raise capital requirements in the European banks, it would be disastrous," Podesta, current chairman of the Center for American Progress, speculated in a "Squawk Box" interview.

(Read more: Could a shaky market get the debt ceiling raised?)

He argued there are precedents to making the banks prove they could withstand a U.S. default.

"They did it with Italy. They did it with Portugal. They did it with Greece. Why not the United States? We seem to be as unable to control our politics as they were," Podesta said.

The European Central Bank is scheduled to take over supervision of euro-zone banks in about a year. Before that, the ECB plans to conduct an asset quality review, followed by stress tests, to ensure that all banks there enter common supervision in good health.

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.


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