D.C. Begins Work On Contingency Plans For Dealing With Federal Default | WAMU 88.5 - American University Radio

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D.C. Begins Work On Contingency Plans For Dealing With Federal Default

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D.C. Council Chairman Kwame Brown is asking the full council to come back from its summer recess so they can meet Monday with the Mayor and the Chief Financial Officer and go over the city's options for dealing with a default.

The District's CFO has warned that if federal lawmakers fail to raise the debt ceiling, the city could see an immediate delay or loss of Medicaid reimbursements and other federal funds.

And even if congress raises the debt ceiling but the federal government's credit rating is downgraded, the District's borrowing costs could increase while at the same time, local revenues could drop. Real estate transactions, for example, could be slowed by higher interest rates.

In short, the District would have a cash-flow problem, and the CFO says the city needs to brace for the worst, and draw up a plan that rations payments.

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