BOEHNER WANTS WALL STREET PERMISSION TO PLAY A DANGEROUS GAME…. When drawing up a list of those eager to see Congress raise the debt ceiling, we tend to think of certain groups: Democrats, economists, Federal Reserve officials, Treasury officials, the mentally sound, etc.
But let’s not forget that the financial industry — not exactly a close ally of the Obama White House — feels as strongly about this as any other entity. Jamie Dimon, the CEO of JPMorgan Chase, recently said anyone willing to risk such “catastrophic and unpredictable” consequences is “crazy.”
With this in mind, House Speaker John Boehner (R-Ohio) has reportedly reached out to Wall Street, asking how much wiggle room he has to play partisan games for a couple of months without doing significant damage to the American and global economy. He probably didn’t care for the response.
The Wall Street executives say even pushing close to the deadline — or talking about it — could have grave consequences in the marketplace.
“[Conservatives] don’t seem to understand that you can’t put everything back in the box. Once that fear of default is in the markets, it doesn’t just go away. We’ll be paying the price for years in higher rates,” said one executive.
Another said that “anyone interested in ‘testing’ the debt ceiling should understand the U.S. debt traded wider [with a higher yield] than Greek debt roughly five years ago. Then go ask CBO what happens to our deficits/public debt to GDP, if the 10-year [Treasury bond] goes from 3.5 percent to 5.5 percent to 7.5 percent.” The executive said such an increase would result in a downgrade of U.S. debt by ratings agencies and an end to the dollar as the standard global reserve currency.
As recently as yesterday, House Majority Leader Eric Cantor (R-Va.) said he’s prepared to push off any congressional work on this until after the United States government hits the debt limit in mid-May, but before we exhaust our ability to borrow money around July 8. In other words, Cantor is inclined to wait for the crisis to get underway, and then think about resolving it.
It’s the exact opposite of what the financial industry considers wise. Indeed, Boehner realizes this — implicit in his outreach to Wall Street is the understanding that raising the debt limit is necessary; he just wants to know if he has some time screw around for a while.
Sen. Chuck Schumer (D-N.Y.) took the right line this morning, “The Speaker seems to be testing out how far he can venture onto a frozen lake before the ice breaks. He should listen to business leaders who are telling him to watch his step. Messing around with the debt ceiling just to satisfy the Tea Party will lead to higher interest rates and an economic cataclysm.”
I suppose we’ll see soon enough whether there are limits to Republican nihilism.