(Updates with Treasury statement on meeting in second paragraph.)
July 22 (Bloomberg) -- Treasury Secretary Timothy F. Geithner met today with Federal Reserve Chairman Ben S. Bernanke and Federal Reserve Bank of New York President William C. Dudley to discuss the implications of a failure of Congress to raise the debt limit.
“While we remain confident that Congress will raise the debt ceiling soon, officials from the Treasury, Federal Reserve Board and the New York Fed met today to discuss the implications for the U.S. economy if Congress fails to act,” according to a joint statement released by the Treasury Department. No further details were disclosed.
President Barack Obama and House Speaker John Boehner, seeking to avert a U.S. default, are pursuing a broad agreement to boost the debt limit while cutting spending by trillions of dollars and overhauling the tax code. Geithner says the Treasury Department’s borrowing ability will expire on Aug. 2 unless Congress raises the ceiling.
Boehner said today that he and the White House are “not close to an agreement” on raising the debt ceiling following a meeting with House Republicans in which the speaker was described as in a gloomy mood.
Dudley, as head of the New York Fed, oversees Wall Street and leads the regional branch through which the central bank executes monetary policy. Dudley is also vice chairman of the policy-setting Federal Open Market Committee and is the only regional chief with a permanent vote.
‘Off the Table’
Geithner has repeatedly said he expects Congress will raise the $14.3 trillion debt ceiling and that Republican leaders have taken default “off the table.” He has not discussed publicly any contingency plans in the event that the Aug. 2 deadline is not met.
Bernanke told the Senate Banking Committee on July 14 that he wanted to “eliminate any expectation that the Fed through any mechanism could offset the impact of a default on the government debt.”
He said “we would do what we could to preserve the operationality of the system. You know, we participate in securities transfers and so on.”
Henry Paulson, Geithner’s predecessor as Treasury secretary, said after a breakfast meeting today with Geithner that “the sense of urgency is clear.”
“Failing to raise the debt ceiling would do irreparable harm to our credit standing, would undermine our ability to lead on global economic issues and would damage our economy,” Paulson, who served under former President George W. Bush, said in an e-mailed statement.
--With assistance from Caroline Salas Gage in New York, and Mike Dorning and Julie Hirschfeld Davis in Washington. Editors: Kevin Costelloe, Carlos Torres
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