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No Decisions Announced At New York Federal Reserve Meeting As Debt Ceiling Deadline Looms

NEW YORK (CBSNewYork/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 officials met in New York with representatives from 20 large banks that serve as primary dealers for the sale of Treasury securities. They took questions amid growing concern that the borrowing limit will not be raised in time to avoid a default on the debt.

Meanwhile, the debt showdown in Congress came and went.

Friday night, the Republican controlled House voted to approve a six month emergency extension to raise the nation's debt ceiling, avoiding an unprecedented government shutdown.

But Senate Democrats scrapped the plan, voting it down in just two hours.

"Our democratic friends here in the Senate have offered no solutions to this crisis that could pass either chamber," said Republican minority leader Sen. Mitch McConnell. 

"We will not solve this problem by standing there with our arms folded and saying I am not talking to anyone," said New York Sen. Charles Schumer.

It's been days of intense lobbying on both sides. Republican House speaker John Boehner, twisting arms to get the House bill passed, which included a cut in spending by $917 billion.

There was even talk of a so-called two-step plan. A balanced budget amendment that would be ratified, state by state, then tied to a second debt limit increase, needed early next year.

Democrats led by Senate majority leader Harry Reid oppose that, but he says he's open to a last-minute deal, including his own $2.4 trillion debt reduction plan.

There are just days to go before the government runs out of money to pay its bills. President Barack Obama even took to Twitter to urge his followers, at the risk of turning off many, telling them to contact their lawmakers for a compromise. 

In New York, no decisions were announced at the Treasury meeting and no details were provided of how the government will decide which bills to pay should the borrowing limit not be raised. 
White House spokesman Jay Carney said the administration did not plan to provide the public with details on how the government will prioritize payments. Carney said the administration plans to lay out its contingency plans, but it would wait until closer to next Tuesday's deadline.

Moody's Investors Service said late Friday that the United States should be able to keep its triple-A credit rating as long as Washington works out a deal that lets it continue to pay bondholders.

"If the debt limit is not raised before Aug. 2, we believe that Treasury would give priority to debt service payments and could thus postpone a potential debt default for a number of days,'' Moody's said in its new report. "Revenues would be more than adequate for some period of time to meet those payments although other outlays would be severely reduced as a result.''
Private economists believe the government would pay bond holders first if the debt limit is not raised. If the Treasury missed a bond payment, the country would likely default on its debt, rattling markets and increasing borrowing costs on most consumer and business loans.

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.

Do you think the country will come up with a plan by the deadline? Sound off below in our comments section...

(TM and Copyright 2011 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2011 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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