Bank of New York's chief Robin Vince makes hay while sun shines on US economy

He notes promising tailwinds like energy independence, tech advances and skilled workforce.

- Ravi Velloor

If Lee Jeans brands itself as "the jeans that built America", you could say Bank of New York (BNY) could stake a similar claim in finance. It is the longest operating company in New York, the oldest member of the S&P 500 and the first stock listed on the New York Stock Exchange. It held President George Washington's account, and a co-founder was Treasury secretary and America's founding father, Alexander Hamilton.

But BNY has salience to American economic history for another reason. You could call it the lender that initiated the US government's debt itch; Warrant No. 1, as the earliest bonds were called, totalled US$200,000 and were issued to the government by BNY in 1789 to pay the salaries of members of the US Congress.

America has carried debt since its inception. For instance, debts incurred during the American Revolutionary War amounted to US$75 million, primarily borrowed from domestic investors and the French government for war materials. However, the debt pile recently passed US$36 trillion (S$49 trillion), fetching warnings by some analysts of impending catastrophe; while Warrant No. 1 was fully paid back, there are fears that the world's biggest economy may default on what it owes to those who own its Treasury bills and bonds, which include domestic pension funds and foreign governments.

Mr Robin Vince, BNY's chief executive, does not make light of the debt mountain. Neither does he express excessive alarm.

"The aggregate level of debt matters, but what matters more is the amount of interest that is paid on the debt," he says, referring to the danger signs. "As the combination of a rising deficit and (elevated) rates, what that means is that the total interest load also increases, even greater than the US defence budget."

What's reassuring is that there are many pathways to deal with that, including issuing less debt to start with, and by creating more economic growth.