2014-05-09T191029Z_1_CBREA481H9O00_RTROPTP_2_UKRAINE-USA-SANCTIONS

Treasury says debt payments could be prioritized in default scenario

File photo of U.S. Treasury Secretary Lew testifiying on Capitol HillBy Tim Reid LOS ANGELES (Reuters) – The Treasury Department has admitted for the first time that the government is technically capable of prioritizing payments if Congress triggers a default crisis by failing to raise the country’s borrowing authority. In a letter to Republican Congressman Jeb Hensarling, a senior aide to Treasury Secretary Jack Lew said the New York Federal Reserve, which pays the principal and interest on government debt, would be “technically capable” of continuing to make those payments while Treasury halted other payments if the United States was unable to borrow more money. Lew and other Treasury officials insisted during last October’s debt limit crisis, when the U.S. came close to defaulting on some government obligations, that “prioritization” – a contingency strategy where bond payments are made while other outlays such as Social Security payments are halted – was not feasible.

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