U.S. Outreach To Banks, Investors Over Possible Default Comes Up Empty - WaPo/Bloomberg

[WillyT]

So... WE bail THEM out when they're in trouble, but...

U.S. outreach to banks, investors over possible default comes up empty
By Zachary A. Goldfarb - WaPo/Bloomberg
Published: July 14

<snip>

bama administration officials have been privately exploring with major banks and foreign investors whether the government could devise a way to avoid a severe disruption in financial markets if the federal debt ceiling is not raised, according to several people familiar with the matter. Officials have discussed suspending some domestic spending in order to make payments to investors in U.S. bonds — which include domestic pension funds and the Chinese government — and possibly selling assets such as gold.

But the message back from the market has been discouraging: The failure to pay any significant obligations would scare away investors and undermine the financial system. The market concerns were underscored late Thursday when the credit-rating agency Standard & Poor’s announced there was a 50 percent chance it would downgrade the United States in the next three months — and perhaps as soon as the end of this month.

S&P said it was losing confidence that U.S. officials would raise the debt ceiling and also produce a plan to rein in the federal debt over the coming years. The agency said a failure to raise the debt ceiling would force the government to withhold payments to bond investors or sharply cut government spending, which could cripple the economy. “The positions of the administration and the Republican leadership are still very far apart,” said John Chambers, S&P managing director. “The tone of the debate has made us wonder whether a compromise can be achieved.”

The Treasury discussions are part of emergency planning to deal with the fallout from a U.S. default that could occur Aug. 3 if President Obama and Congress do not strike an agreement to raise the federal limit on borrowing.

<snip>

More: http://www.washingtonpost.com/national/health-science/debt-limit-us-outreach-to-banks-investors-over-possible-default-comes-up-empty/2011/07/14/gIQAHRB5EI_story.html

:wtf:

:nuke: