WALL STREET TO REPUBLICANS: STOP SCREWING AROUND…. Congressional Republican leaders know full well that they have to raise the debt ceiling. It’s not optional — to fail is to crash the economy again, only this time would be the result of partisan stupidity on a historic scale.
But GOP leaders also know they have some leverage, and want to see what they can get out of Democrats in the form of ransom before doing what has to be done. Indeed, we learned last week that House Speaker John Boehner (R-Ohio) has already reached out to financial industry leaders, asking how much time he has to screw around before doing lasting damage. He was told that “even pushing close to the deadline — or talking about it — could have grave consequences in the marketplace.”
The Wall Street Journal adds some highly relevant details to this, noting that the discussions between Republicans and the financial industry have been even broader than previously reported.
During a recent series of meetings and fund-raisers, top Wall Street executives and lobbyists have urged Republicans to resolve the debt-ceiling debate quickly or risk turmoil in the bond market.
In the sessions, House Speaker John Boehner explained the politics of the vote to investors, telling them Republicans won’t approve an increase in how much the U.S. can borrow without a long-term deficit-reduction plan, according to people familiar with his remarks. In turn, the executives said delaying a resolution could unnerve skittish credit markets. […]
“Bond markets will start to get very nervous if we go beyond May 16 without a debt-ceiling agreement being reached,” said Ajay Rajadhyaksha, head of fixed-income strategy at Barclays Capital.
Now, under normal circumstances, this would generate fairly swift action. Wall Street lobbyists keep Boehner on speed dial so they can tell him what to do quickly, and Republicans are nearly always inclined to do exactly what Wall Street instructs them to do.
And yet, for now, GOP leaders are proceeding with their hostage strategy. Last week, House Majority Leader Eric Cantor (R-Va.) went so far as to say publicly that he wants Republicans to push off action until after the nation reaches the debt limit in mid-May, deliberately creating a crisis situation.
Greg Sargent has a smart take on this, connecting the story to this morning’s developments on Wall Street: “The S&P story seems to have given Republicans momentum today in the spin wars over the debt ceiling. And in truth, though Timothy Geithner said this weekend that GOP leaders had assured him that they understood the need to raise the debt ceiling, Dems don’t seem to be drawing as hard a line on a “clean” vote as they might have. The moment for doing that convincingly may have passed. Some kind of compromise in which Dems agree to some sort of spending cut framework appears likely. But the fact that the GOP’s brinkmanship is rattling the party’s corporate benefactors seems kind of important, and should be part of the discussion.”