By Pete Schroeder and Michelle Price

WASHINGTON (Reuters) – Wall Street firms are sounding alarm bells and dusting off contingency plans as fears grow that Congress may fail to reach a deal to raise the country’s debt limit in time, executives said.

The federal government funding is due to end on Thursday, and the borrowing authority will expire Oct. 18. Democrats control only one chamber of Congress. They are trying to stop a credit default in America. Republicans blocked their Tuesday efforts.

Global markets could be affected if the law limit for how much the government can borrow to pay its debt obligations and fund its budget deficits is not raised. It currently stands at $28.4 trillion.

Rob Toomey (managing director and general counsel, Securities Industry and Financial Markets Association) said that if Treasury securities were not paid, “we honestly don’t understand what would happen.”

“Certainly, you can expect significant volatility were this to occur, and the market needs to be prepared for that.”

JPMorgan Chase & Co (NYSE:) CEO Jamie Dimon told Reuters on Tuesday that the bank had begun preparing for the possibility of a U.S. default, a “potentially catastrophic” event, although he added he expected lawmakers would reach a last-minute deal. Analysts believe that there is a slight difference in the spread between three-month Treasury bills (which are more likely to default) and one-month Treasury bill bills (which have a lower risk). One-month bills yield currently 0.07%, while three-month bills are at 0.04%. Both yielded approximately 0.08% at the start of the year.

Global markets have been affected by previous debt limit crises, even though they were resolved. A now-notorious 2011 standoff over the ceiling led S&P Global (NYSE:) Ratings to downgrade U.S. sovereign debt for the first time, wiping $2.4 trillion off U.S. stocks. 2017 saw more disruption, but talks went back to the wire.

They must be prepared for default given the vulnerability of Wall Street’s banks, investors, and dealers to default.

Toomey said that the group has reaffirmed its plans to prepare for the worst case scenario where the Treasury cannot pay the debt.

We’re bringing back that work to our members so that we can all be on the same page.

SIFMA currently is considering two scenarios. One scenario that is more likely to be realized would see Treasury announce ahead of any payment it will be rolling over maturing securities for another day. This would allow the Treasury to buy time and pay bondholders. Even with increased volatility, this would permit the market’s continued functioning.

SIFMA said that another, less likely scenario is for the Treasury to allow bonds mature. However, this would cause more disruption as unpaid bonds would need to still be settled, but wouldn’t exist in U.S. Federal Reserve system.

The plans, in general, aim to ensure that the firms have enough technology capability, staff, cash, and liquidity to support high volumes of trading to keep markets functioning.

A group of bond dealers called the Treasury Market Practices Group has also developed a plan to trade in defaulted Treasuries. It was reviewed by this Fed earlier this year.

You can also find plans being made by individual banks internally.

Dimon indicated that JPMorgan was already planning for what a default might do to the money, repo, capital markets and ratings agencies. It has been looking through the contracts of its clients to see how they react.

“You’ve got to check the contracts to try to predict it out,” he said. This is a lot of work.