Default Timebomb: Treasury's Doomsday Playbook

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Oct. 14 (Bloomberg) -- Michael McKee reports on the Treasury's plans if the debt-ceiling is breached. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

House correspondent.

Congressional republicans move forward to a u.s. default -- it could happen as early as this week.

It will be up to the administration, treasury secretary jack lew, to do with the consequences.

Mike mckee has the real deal on the options and jack lew's doomsday playbook.

As you pointed out it is not as if we hit 12 midnight on october 17 and suddenly we are in default.

It is important to know that it can come anytime after that date when the government has more pills come in than cash.

At the latest estimate is sometime between october 23 and the 30th.

I see five scenarios for jack lew between thursday and that date.

The first would be prioritization.

First bond holders get paid more than the rest of the government.

Most of that government will shut down.

Bondholders would probably call that a default.

In other market collapse, you still get a recession at of it.

What is considered most likely for the treasury, everybody gets paid but only when enough funds are available in the bank account.

The bills keep coming in faster than you can pay, you get the default, you get the market crash, then you get the recession.

Then you get the gimmicks, the platinum point, the high coupon super bond.

Default would be put off in theory but would markets buy it if they don't think these are the valid the echo they may not attend the auctions.

The fed may refuse to participate.

And the house would try to impeach the president.

The markets crash, the economy faces possible recession.

The markets dive might bring immediate congressional action.

Of coarse that is playing with fire.

Not a lot of good choices out there.

What constitutes as a default for u.s.? that is it an interesting question.

For all of our history all you have gotten from the treasury department is a promise to pay a a certain day.

-- pay at a certain date.

There's nothing written down on how this happens.

They're going to have to figure this out as they go along.

It will be a winged scenario as we have never been there.

We're not like to be winging it

This text has been automatically generated. It may not be 100% accurate.

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