Banks prepare for potential post-default trading

Now that the unthinkable has become thinkable, the major banks must make sure that the markets for Treasurys and short-term funding facilities keep operating. Even the possibility of the U.S. missing a payment on its debt become a huge deal, so they're trying to work out any potential problems. Among the basic questions: Can Treasurys even be traded after a default? From the WSJ:

Trading executives from the largest Wall Street dealers agreed on a conference call Wednesday, conducted by the industry trade group the Securities Industry Financial Markets Association, to a number of procedures to trade Treasury bonds if the U.S. misses a payment on its debt, said participants on the call. Chiefly, they agreed to trade the bonds so that whoever held it on the day of default would receive any interest and principal payments when and if the government makes its payments. If the debt is sold to another party after the default, that investor would receive only the interest accrued since the date of the sale.

One sign of the concern: Money-market funds, considered among the safest short-term investments for companies and individuals, have been selling assets in recent days to raise cash, just in case.