Today, John Boehner bowed to the inevitable logic of the impending political season and placed a “clean” debt ceiling increase bill on the floor of the House. At this writing, the bill passed with 28 Republican and 193 Democratic votes. Now it moves on to the Senate, where it is expected to pass in time to allow the Treasury to keep issuing debt instruments.
In all likelihood the US debt ceiling will need to be raised no later than this coming March. The question now is whether we are going to see a repeat of last October’s game of chicken. According to Deutsche Bank, the US sovereign CDS spread has stabilized, with market participants not anticipating a major disruption (note that US CDS is fairly illiquid with “lumpy” trading activity).
It took a while for the public to begin to care about the debt ceiling fiasco, but the realization is sinking in that it’s not just “fun and games”. Google search frequency for the term “government default” has moved way past the spike in 2011 to hit a new record.
Equity investors have pinned their hopes on a potential breakthrough in negotiations, as Paul Ryan suddenly stepped into a leadership role (see post). VIX dropped some 24% (relative move) in a couple of days in response and indices rose sharply.
Expectations have risen that the Republican leadership will attempt to find a face saving solution that will reduce the ongoing bleeding of popular support for the GOP. The party is in trouble and is facing potential loss of seats in the House. What’s even more concerning for some is the prospect of a Democrat in the White House for another 8 years. If anything, this should be enough of an impetus to find a speedy resolution.
Bond investors however are not taking any chances. The yield curve inversion has now moved beyond 1-month bills, with maturities out to three months feeling the impact. Rumors persist that institutions are continuing to move out of treasury money market accounts in fear of having their funds frozen.
Today much of the action has moved to the Senate, with hopes that something positive could happen this weekend. The news so far is not encouraging.
POLITICO: – It’s now the Harry and Mitch show.
After Senate Democratic leaders rejected a proposal Saturday by Sen. Susan Collins (R-Maine) to end the budget impasse, the burden to find a solution now falls squarely on Majority Leader Harry Reid and Minority Leader Mitch McConnell — two shrewd tacticians who have a long, complicated and contentious personal and political history with each other.
Republican senators, eager for a way out of a shutdown fight that has roiled their party’s brand, reacted to the leadership discussions positively, believing that the two crafty dealmakers could concoct a proposal to reopen the government and avert the nation’s first-ever default as soon as next week.
Reid, however, was notably more dour.
When asked if he is confident he could reach a deal with McConnell, Reid told POLITICO: “No.”
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The Republican party has a problem. The government shutdown seems to be helping the president in the polls.Simultaneously Republicans’ image is getting hammered, as an increasingly growing proportion of US voters blame them for the shutdown.Associated …
This is a syndicated repost courtesy of Sober Look. To view original, click here. Reposted with permission. The public is often amazed at Washington’s inability to solve problems. Some have attributed that constant impasse to polarization in Congress – with very little overlap in attitudes across the party lines. But is this truly something new…
msnbc.com (blog)JPMorgan Drafts Republicans for Damage ControlBusinessWeekBy Robert Schmidt on June 12, 2012 As JPMorgan Chase & Co. (JPM) (JPM) began to plot its Washington damage control strategy in the wake of last month's $2 billion trading…
…labor’s inability to win the recall is more evidence of their inability to reverse their own structural decline. They’re not winning on worksites, as the share of the labor force that’s unionized has been dropping for decades, and they’re not winning at the ballot box. …Labor is getting weaker. And corporations, in part due to…
By James Kwak My Atlantic column today is on the bizarre fixation that some conservatives have with taxing poor people, pointed out by Bruce Bartlett in his latest column. Here’s one explanation: The other, even-more-disturbing explanation, is that Republicans see the rich … Continue reading →
Republican governor survives Wisconsin recall (via AFP) US Republicans claimed a “momentous victory” after Wisconsin’s union-busting Republican governor survived a recall election aimed at ousting him mid-term. Governor Scott Walker prompted mass protests — and ultimately, Tuesday’s rare special election — after pushing through legislation last year to…
US House Republicans seek cuts in CFTC fundingReuters* House GOP seek to slash CFTC 2013 budget by $25 mln * Propose modest increase for SEC of $50 mln * Democrats: JPMorgan loss is a case for funding boost * Appropriations panels to review budgets Wed…