WASHINGTON (AP) — Executives from the country’s biggest banks met with U.S. Treasury officials Friday to discuss how debt auctions will be handled if Congress fails to raise the borrowing limit before Tuesday’s deadline.
Treasury met with representatives from 20 large banks that serve as primary dealers for the sale of Treasury securities and took questions amid growing concern that the borrowing limit will not be raised in time to avoid a default on the debt.
In a statement, Treasury provided no details of how the government will decide which bills to pay should the borrowing limit not be raised. The statement said the meeting was to prepare for an upcoming quarterly debt auction.
White House spokesman Jay Carney said the administration did not plan to provide the public with details Friday on how the government will prioritize payments. Administration officials had said Thursday that they would discuss the government’s contingency plans in the next few days. Carney said the administration still planned to lay out its contingency plans, but it would wait until closer to next Tuesday’s deadline.
Treasury makes 80 million payments a month.
While Treasury will not have the ability after Aug. 2 to borrow new debt, it would still be able to refinance debt that is maturing as long as the operation did not increase the total debt supply. Treasury has to borrow on average $125 billion in new debt each month and refinance $500 billion in maturing debt.
Private economists believe the government would pay bond holders first. If the Treasury missed a bond payment, the country would likely default on its debt. That could rattle markets and increase borrowing costs on most consumer and business loans, many of which are linked to the rates on Treasurys.
Some economists say the government will have enough cash on hand to meet interest payments and some other payments until as late as Aug. 15.
Officials of the bond-trading divisions of JPMorgan, Goldman Sachs, Citigroup and the other big banks attended the meeting at the New York Federal Reserve Bank.
Treasury would normally meet with half of the 20 dealers before a quarterly auction. However, given the heighted concerns surrounding the debt stalemate, Treasury decided to expand the discussions to include all 20 banks.
Treasury said in its statement that the general consensus among the banks participating in the discussion was that Congress “should act as quickly as possible to raise the debt ceiling for as long a period as possible to lift the cloud of uncertainty from the economy.”
The Obama administration wants Congress to increase the borrowing limit to last beyond the November 2012 elections. Republicans in the House want a smaller initial increase, and second increases tied to more spending cuts that would take place next year before the election.