The U.S. Treasury will give priority to making interest payments to holders of government bonds when due if lawmakers fail to reach an agreement to raise the debt ceiling, according to an administration official.
The official requested anonymity because no announcement has been made. The Treasury has said about $90 billion in debt matures on Aug. 4 and more than $30 billion in interest comes due Aug. 15. Overall, more than $500 billion matures in August.
Six-month Treasury bills maturing Aug. 4 pared losses after the comments. Obama administration officials will brief the public no earlier than after financial markets close tomorrow on priorities for paying the nation’s bills if the $14.3 trillion limit isn’t raised, a Democratic Party official said earlier.
Treasury Secretary Timothy F. Geithner has repeatedly said the government’s authority to borrow will run out on Aug. 2 unless Congress raises the debt ceiling. Republicans and Democrats have been unable to agree on an increase in the debt cap or budget cuts, leading to concerns that the U.S. will lose its AAA credit rating.
Senate Majority Leader Harry Reid said he will move tonight to kill House Speaker John Boehner’s debt-ceiling plan, paving the way for Senate votes this weekend on a possible compromise to avert a potential U.S. default.
Republican House leaders expressed optimism their measure would pass in the chamber later today. If it does, Reid, a Nevada Democrat, said he plans to bring Boehner’s legislation immediately to the floor and “it will be defeated.”
Bankers such as Goldman Sachs Group Inc. Chairman and Chief Executive Officer Lloyd Blankfein and JPMorgan Chase & Co.’s Jamie Dimon called on President Barack Obama and Congress to raise the limit.
“The consequences of inaction -- for our economy, the already struggling job market, the financial circumstances of American businesses and families, and for America’s global economic leadership -- would be very grave,” the executives wrote in the letter sent today by the Financial Services Forum, a Washington-based trade group representing the largest banks.
The Treasury has previously said it cannot pick and choose which bills do pay in the event it cannot borrow enough to cover all its obligations, a process members of Congress called “prioritization.”
“This ‘prioritization’ proposal advocates a radical and deeply irresponsible departure from the commitment by presidents of both parties, throughout American history, to honor all of the commitments our nation has made,” Geithner said in a letter to Congress last month.
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