Wall Street Expects Sen. Reid to Give “Some Sort of Clarification” on his Statement that Banks are not Lending: Report

FBN’s Sr. Correspondent Charlie Gasparino reports that Wall Street is expecting a clarification from Senator Reid following his earlier comments that banks are not lending. Senior bank officials told Gasparino “what Reid said is false,” and that “there is no change in bank lending amid what’s going on” with the debt discussions. Gasparino also reports that sources say Morgan Stanley (MS) is developing a contingency plan in the unlikely event the United States defaults, where they will trade Treasury bonds as “receivables,” or “money good.” Excerpts from the report are below, courtesy of Fox Business Network:

On Wall Street bankers refuting Sen. Reid’s comments:
“Senior bank officials, who are in direct contact with the Treasury Department, are telling the FOX Business Network that what Sen. Reid said is false. The banks are being told that Secretary Geithner made no such remark on bank lending. They are expecting some sort of a clarification. Whether they get it or not, this is the political silly season on this whole thing. And even if Treasury Secretary Geithner said that, what they are saying is it is false. There is no change in bank lending amid what’s going on here.”

On Morgan Stanley’s contingency plan in the event the United States defaults:
“In the event of a default, it’s really interesting, you have interesting contingency planning going on inside the big Wall Street firms. One firm in particular, Morgan Stanley, has developed or is developing a contingency plan, in the event that Treasury bonds go into default…They are going to basically be traded, we are told, as if, not Treasury Bonds, but IOUs. Receivables. That you will eventually get paid by the Treasury, so trade them as receivable. All bonds are an IOU, but this will be traded as a receivable because the Treasury department is eventually, once we get this whole thing sorted out, going to be money good.”

On the Federal Reserve/Treasury meeting:
“The Federal Reserve/Treasury Meeting with the broker dealers just ended Underscoring the August 2^nd date for running out of money is ‘real’. And also there was a meeting announced to gauge interest for Monday’s Treasury auction.”

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