NEW YORK (CBSNewYork/AP) — While all eyes are on Washington as Congress tries to hammer out a deal to raise the nation’s debt ceiling, a crucial meeting on the matter started here in New York.

Executives from the nation’s largest banks met face to face with Treasury Department officials about what will happen if Congress fails to raise its borrowing limit before next week’s deadline.

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The Treasury late Thursday invited 20 of the largest banks to a noon meeting at the New York Federal Reserve.

The meeting comes as Republicans in Congress called off a vote last night on House Speaker John Boehner’s vote to raise the debt ceiling. The vote was called off because Boehner couldn’t garner enough conservative support to pass it. Some Republicans have said the bill doesn’t do enough to cut federal spending.

Officials representing the bond-trading divisions of banks including JPMorgan, Citigroup, Goldman Sachs and Barclays Capital have been invited to the discussions. Officials said they wanted to meet with all of the big banks involved in the Treasury bond market in light of the concerns confronting the market at the moment with the impasse over approving an increase in the government’s $14.3 trillion borrowing limit.

The government issues large amounts of securities every three months in a process called a “quarterly refunding.” The next refunding is scheduled to take place the week of Aug. 15 and is expected to feature the sale of different types of securities on Tuesday, Wednesday and Thursday of that week.

However, the size of those auctions and their timing have all been put into doubt by the congressional impasse over the debt ceiling.

Meanwhile, President Obama is telling Congress in no uncertain terms, get a deal done. “The time for putting party first is over,” Obama said Friday. “The time for putting American people first, is now.”

Officials have warned of serious consequences if the Treasury failed to make payments on its debt, triggering a default that could send shockwaves through financial markets around the world. However, so far the Treasury bond market has continued to function normally, indicating that investors expect Congress to pass an increase in the debt limit before a default occurs.

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Senate Majority leader Harry Reid called on the Senate Republican leader on Friday to join him in a compromise. “There’s no time left to vote on another bill,” Reid said. 

Senator Charles Schumer said Wednesday that New Yorker’s disability and tuition payments could be impacted. Schumer also blasted the Republican plan championed by Boehner.

“Speaker Boehner should not, and we can not, let a small block of House Republicans lead the whole nation off a cliff.”

Rep. Eliot Engel (D-NY) suggested earlier this week that Obama simply bypass the Congress and authorize an increase in the debt ceiling himself. Engel suggested Obama had the authority under the 14th amendment, which says that the validity of the nation’s public debt “shall not be questioned.”

Financial analysts have said that Treasury would be expected to use any existing cash on hand to make interest payments to prevent a default for as long as possible. Some private economists have suggested that the government’s cash reserves could be enough to prevent a default for perhaps two weeks beyond the Aug. 2 deadline.

Treasury officials refused to provide specifics on what they planned to tell the major financial institutions on Friday but they indicated that the discussions would allow officials to hear concerns voiced by the biggest participants in the bond market.

Would you prefer the federal government increase the debt limit or cut spending? Sound off in our comments section below…

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