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Fed Officials Meet about Debt Contingencies

July 22, 2011

Some of the U.S. government's top finance officials are taking a closer look at what might happen if deadlocked debt talks between the president and lawmakers turn into an all-out stalemate.

Treasury Secretary Timothy Geithner and central bank chief Ben Bernanke met in Washington Friday with William Dudley, who heads the Federal Reserve's New York branch.

In a joint statement, the three said they remain confident Congress will raise the country's borrowing limit before the government runs out of money on August 2. But they also said they discussed the implications for the world's largest economy if Congress fails to act.

Both Secretary Geithner and Federal Reserve Chairman Bernanke have previously warned of catastrophic consequences if the U.S. government is no longer to pay all of its bills.

On Thursday, the chief of the Federal Reserve's Philadelphia branch told Reuters that Fed and Treasury Department policy makers are in “contingency planning mode,” trying to determine which debts would be paid.

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