Wall St., Prepared for the Worst, in Wait-and-See Mode

Wall Street execs and traders will spend the weekend holding their breath as the debt impasse continues to suck all the oxygen from the room. According to NY Times' Dealbook, contingency plans are in place, positions established and cash sidelined. Now it’s a matter of wait-and-see, along with collective annoyance that the confrontation has dragged on this long. While few think the United States will default on its debt obligations, if 2008 has taught investors anything, it’s to prepare for the worst.

Bank of America, at least, weeks ago commissioned a team to study the impact a default might have on customers and the broader economy. Now, with little else to do in the way of preparation, some officials are cancelling vacations and clinging to their BlackBerrys. Other banks have dispatched executives to Washington to meet with members of Congress and regulators. The Securities Industry and Financial Markets Association, an influential Wall Street trade group, organized a grassroots campaign where banks and other financial firms jotted off letters to lawmakers, urging them to take action. On Thursday, rating agency Standard & Poor’s held a conference call for more than 1,000 investors.

And in New York on Friday, some of the biggest dealers in Treasury debt — Goldman Sachs and JPMorgan, among others — spent Friday morning with officials at the Federal Reserve of New York, a somewhat unnerving echo of 2008 when bankers huddled there to discuss preventing a financial collapse. In contrast, Friday’s meeting is part of a regular event at the Fed, planned some time ago.

Investors are similarly sanguine about what’s to come, having already marked their escape hatches in the event of a default. Again, 2008 has proven a cautionary tale for hedge funds and others worried about unforeseen market calamity. Some hedge funds are going to cash, parking money on the sidelines in case things go haywire. At least one hedge fund is stockpiling cash in a series of F.D.I.C.-insured accounts…..

Don't stop reading now. Find out the rest at http://dealbook.nytimes.com/2011/07/29/having-prepared-for-the-worst-its-wait-and-see-on-wall-street/