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Debt crisis: Deal sought to head off stock plunge

By David Espo

Associated Press

Published: Saturday, July 23 2011 4:25 p.m. MDT

Senate Minority Leader Mitch McConnell, R-Ky., Senate Majority Leader Harry Reid, D-Nev., House Speaker John Boehner, R-Ohio, and House Democratic Leader Nancy Pelosi, D-Calif. are seen at a photo opportunity in the House Speaker's office before a meeting on the debt limit increase on Capitol Hill in Washington on Saturday, July 23, 2011.

Harry Hamburg, Associated Press

WASHINGTON — Precariously short of time, congressional leaders struggled in urgent, weekend-long talks to avert an unprecedented government default, desperate to show enough progress to head off a plunge in stock prices when Asian markets open ahead of the U.S. workweek.

President Barack Obama met Saturday with Republican and Democratic leaders — but only briefly— the day after House Speaker John Boehner abruptly broke off his own once-promising compromise talks with the White House.

But congressional aides labored to produce at least a framework agreement to raise the nation's debt limit by Monday, congressional officials said. Even that would allow scarcely enough time for the House and Senate to clear legislation in time for Obama's signature by the Aug. 2 deadline, a week from Tuesday.

House Speaker John Boehner told rank-and-file Republicans in a conference call hoped to be able to announce a "viable framework for progress" by 4 p.m. EDT on Sunday, before the stock markets open in Japan and elsewhere in Asia, according to two participants. He was meeting Saturday evening with House Democratic leader Nancy Pelosi, Senate Majority leader Harry Reid and Senate Republican leader Mitch McConnell.

Lawmakers fear a big drop in investor confidence in stocks and bonds could start in Asia and sweep toward Europe and the Americas, causing U.S. stock values to plunge on Monday.

Barring action by Aug. 2, the Treasury will run out of the money needed to pay all its bills, triggering a possible default that could seriously damage the domestic economy and send damaging waves across the globe. Obama has warned repeatedly of the possibility of a spike in interest rates that could affect Americans' mortgages, credit cards and other forms of personal debt.

In talks through the afternoon, congressional aides were looking at an immediate debt limit increase of about $1 trillion, one official said, with slightly higher spending cuts to be locked into place simultaneously. Another $1.4 trillion in additional borrowing authority would be needed to satisfy Obama's demand that any deal extend into 2013, and it appeared the two sides had not yet agreed how to bridge their differences.

"We seek an extension of the debt ceiling through at least the end of 2012. We will not send a message of uncertainty to the world," Reid said in a statement issued in late afternoon.

"The bipartisan leadership in Congress is committed to working on new legislation that will prevent default while substantially reducing Washington spending," McConnell said in a written statement not long after he, Boehner and Democratic leaders met with Obama at the White House.

Obama appeared grim-faced as he convened the meeting around the big table in the White House Cabinet Room. He was flanked by Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nev. Vice President Joe Biden, McConnell and Pelosi also attended.

The four congressional leaders planned to meet again, at the Capitol, in the early evening.

The only aides attending the White House meeting were budget director Jack Lew and Treasury Secretary Tim Geithner, who emphasized the concern about Asia.

Afterward, White House press secretary Jay Carney issued a stern statement: "Congress should refrain from playing reckless political games with our economy. Instead, it should be responsible and do its job, avoiding default and cutting the deficit."

Sixteen blocks away at the Capitol, congressional aides said the White House would not have a presence at the bargaining table with House and Senate leaders.

Under normal procedures, Boehner would need to have legislation on the House floor by Wednesday to allow enough time for a measure to reach Obama's desk in time to meet the debt-limit deadline.

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