WASHINGTON - To Wall Street, the partial government shutdown is another unfortunate economic speed bump caused by partisan political fighting.
However, failure to raise the debt limit, triggering a first-ever federal default, would be a brick wall on the road to recovery.
"There's precedent for a government shutdown. There's no precedent for default," Goldman Sachs Group Inc. Chief Executive Lloyd Blankfein told reporters after he and 14 other financial industry executives met Wednesday with President Barack Obama.
"We're the most important economy in the world. We're the reserve currency of the world," Blankfein said. "Payments have to go out to people. If money doesn't flow in, money doesn't flow out."
The fiscal standoff between Democrats and Republicans in Washington has Wall Street executives and investors nervous as the Oct. 17 deadline for raising the nation's $16.7 trillion debt limit approaches.
Investors generally don't think the government shutdown, at least at this point, will be a big hit to the economy.
But the prospect of the U.S. government defaulting on its debts raises far more serious risks, said Tom Lee, chief U.S. equity strategist at JPMorgan Chase & Co.
"There would be quite a lot of panic," he said.
Obama said that the threat of default made this not just another partisan Washington fight, and that Wall Street executives were right to be worried.
With no compromise in sight, Blankfein, JPMorgan Chase & Co. Chief Executive Jamie Dimon, Bank of America Corp. Chief Executive Brian Moynihan and others went to Washington and warned politicians not to risk damage to the still-fragile economy.
The shutdown probably won't have a significant effect on the economy unless it extends into next week, said Mark Zandi, chief economist at Moody's Analytics.
At that point, the standoff would start getting dangerously close to Oct. 17. That's the date that Treasury Secretary Jacob Lew has said the government would run out of borrowing authority and would have only $30 billion on hand to pay bills of as much as $60 billion.
A government default would cause severe economic harm and push the nation back into recession, Zandi said.