NY, Wall Street Brace for Pain in U.S. Debt Standoff

Friday, Jul 29, 2011  |  Updated 6:13 PM EDT
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NY Braces for Pain in Debt Standoff

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The Capitol building in Albany

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Of all the huge numbers being batted around Washington during its debt-crisis battle in Congress, New York state Comptroller Thomas DiNapoli is focusing on one back in Albany: $7 billion.

That's how much the state is counting on from the federal government over the next two months in Medicaid, education and other state funding.

Any agreement to resolve the crisis is expected to force deep federal spending cuts. That could derail the state's recovery and force more painful cuts.

DiNapoli also says Friday credit rating agencies are already telling him that even if the crisis is resolved, federal interest rates could still rise as the nation's credit is downgraded, triggering a possible downgrade in New York and potentially sending Wall Street into a "tailspin."

Meanwhile, New York City Comptroller John Liu is calling for a task force to monitor the impact of potentially delayed Social Security payments to 1.1 million seniors across the five boroughs.

"I have seniors all over the city coming up to me and asking 'am I gonna get my social security check next week'?" Liu told NBC New York.

The stock market declined for a sixth straight day Friday as financial advisers fielded a new round of calls and emails from clients wondering whether to get out or sit tight.

Investors pulled about $32 billion out of money-market mutual funds for the week that ended Wednesday, according to fund tracker Lipper Inc. That is just a tiny fraction of the $2.6 trillion invested in such funds. But the exodus appeared to be accelerating at week's end as Tuesday's deadline for reaching an agreement on Capitol Hill drew near.

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