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Treasury Officials: We're Taking Steps To Avoid Default

This is good news. The longer they can stretch this out, the less leverage the Republicans will have: Treasury Department officials said Monday that they will begin to take extraordinary actions Friday to manage the government's finances so the

This is good news. The longer they can stretch this out, the less leverage the Republicans will have:

Treasury Department officials said Monday that they will begin to take extraordinary actions Friday to manage the government's finances so the U.S. won't default after hitting its borrowing limit on May 16.

The moves come amid divisions among congressional leaders over how to raise the $14.29 trillion debt limit and avoid a default that Treasury officials say could cause another financial crisis.

Treasury Secretary Tim Geithner told lawmakers last month that the U.S. would hit the debt ceiling by May 16 and could default as soon as July 8. Officials now estimate that the actions announced Monday, combined with stronger-than-expected tax receipts, will enable the government to postpone a possible default until Aug. 2. But the longer Congress delays raising the debt ceiling, the greater the risk that markets will fall due to fears that the government won't meet its financial obligations.

In the first emergency step, Treasury on Friday will stop issuing state and local government series securities, commonly known as SLGS. That could make it harder for states and cities to issue debt, because they will have to seek issuers in the private market.

If the debt limit hasn't been raised by May 16, the government will begin delaying payments into two government pension funds and redeeming Treasury securities in those funds. It also will suspend its daily investment of Treasury securities into another government employees' retirement plan.

In addition, Treasury officials are prepared to suspend their daily reinvestment of Treasury securities held as investments in the Exchange Stabilization Fund, a fund held by the government to guard against exchange-rate fluctuations.

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