Debt Ceiling

White House, Republican Meeting "Inconclusive", To Continue Throughout The Night

UPDATE: The Day in Washington in 2 minutes added

In what can at best be described as a "fluid" situation, one in which according to initial press reports the White House and the GOP couldn't even compromise on what had actually been said, it seems that while both sides are eager to move on with the debt ceiling extension, the GOP is still hoping in trying to preserve some political capital, of which it will be left with virtually nil if it caves to every last demand by the democrats, namely "reopen the government and then we can negotiate" losing all leverage in the process. And a loss of all capital and leverage is precisely what the GOP will "achieve" according to Politico, which clarified that "House Republicans told Obama that they could reopen the federal government by early next week if the president and Senate Democrats agree to their debt-ceiling proposal" - a proposal which Obama has already said he would accept. In other words, full capitulation by Boehner appears imminent. Politico adds: "President Barack Obama and House Republicans clashed in a meeting Thursday afternoon over how soon the government can be reopened, even as the GOP offered to lift the debt limit for six weeks, according to sources familiar with the session. Aides will continue the discussion through the night to see if they could find common ground on how to move forward on the debt limit and government funding."

White House And Republicans Issue Dueling Statements - Market In Limbo

It would appear that the two sides cannot even compromise of what was said the compromise talks.


“Well, he didn’t say yes. He didn’t say no,” Ryan said. “We’re continuing to negotiate this eventing,” Ryan said.

JP Morgan Money Market Funds Join Fidelity, Sell Bills "In Light Of Possible U.S. Government Default"

Yesterday, it was Fidelity who in conducting its fiduciary duty, announced it was getting out of any and all near-term risky Bill insturments, namely those that mature just around the time of a possible technical debt default. Today, while the stock market was soaring on hope that a Washington debt ceiling deal was imminent, it was another firm that was quietly doing the opposite, and was taking "action in light of a possible US government default), and as highlighted earlier when we showed the ongoing divergence between stocks and Bills, was quietly "boosting" liquidity (i.e. selling short-term securities) in order to avoid breaking the buck (which as we also learned yesterday had been breached by not only the Reserve fund but by 28 other heretofore unknown money market funds). The firm: JPMorgan.

A Look At The Fed's Nest In 2014: Here Are Next Year's Voting Hawks And Doves

With Janet Yellen now confirmed as Bernanke Mark 2, it is time to recall that in addition to a new Chairman, four of the Fed's voting members will also rotate. And while below is the latest preview of the voting FOMC members (previously 2011 and 2012) ranked by Reuters in terms of their dovishness and hawiskness, the reality is that the peripheral Fed presidents (here we focus on the Hawks obviously) are nothing but figureheads whose only function is to be roundly ignored if and when they dissent with the new Chairman.

Guest Post: Gold And The Four Words That Define Western Economic Policy

Despite nearly $17 trillion reasons, there are investors stupid enough to believe that debt issued by the world’s largest debtor country (i.e. US Treasuries) should be treated as a risk-free asset. This is even more astounding given that the possibility of formal default is only a matter of days away. Treasury bond defenders will no doubt point out that in a fiat currency world where the central bank has the freedom to print ex nihilo money to its heart’s content, the very idea of default is absurd. But that is to confuse nominal returns with real ones. The piper must, at some point, be paid. And someone must pay him. As to whom? This is the foundation of western economic policy, distilled into just four words: the unborn cannot vote. The debt mountain cannot and will not resolve itself. And this, again, is why we own gold; because we think there is a non-trivial chance of a gigantic financial system reset.

Meanwhile In The Senate...

Three explanations have been provided for this peculiar exhibit of "spilled" cash in the Senate's Hart Building:

i) Step aside "Bernanke chopper"; presenting the "Yellen briefcase"

ii) Debt ceiling compromises don't come cheaply

iii) A Senator just cashed out of their SPX calls

All are equally likely, although perhaps what is saddest is that nobody even wants to pick it the strewn "reserve" currency.

Goldman's Take: "Clear Possibility That Final Resolution Might Not Be Reached Until Shortly After October 17"

"The debt limit deadline looks increasingly likely to be pushed off with a short-term extension. It looks less likely that the partial federal shutdown will be ended with the extension, but this is still unclear. There is still some uncertainty on the path to resolution over the next week, but the fact that both parties have accepted the notion of a "clean" extension reduces the risk of the Treasury's missing scheduled payments due to the debt limit...  In our view, the developments over the last day reduce the probability of "tail risk" scenarios that would result from going far past the deadline, but there is still a good chance that Congress will run up to the deadline before reaching a final resolution and there is a clear possibility that final resolution might not be reached until shortly after October 17. "

Senate Democrats Warn Debt Ceiling Extension May Not Pass Unless Republicans Also Agree To Reopen Government

As the White House statement suggested earlier, the GOP gambit for a "clean" 6-week debt limit extension, already accepted as a given by the market, may not be able to pass unless the Republicans fold some more, according to the latest news out of The Hill which reports that "Senate Democrats could reject a House GOP proposal to extend the nation’s debt ceiling by a few weeks, saying any short-term debt-limit increase should also reopen the government." This step was to be expected: the House Republicans are once again in disarray and this is the perfect time to demand even more concessions. However, with their political credibility, and capital, already at record lows, will the republicans agree to not only fold on the debt ceiling, albeit temporarily, but also passing a Continuing Resolution - which as a reminder was the source of contention all along?

Boehner Explains Why He Is About To Kick Can, Fold - Live Webcast

The Speaker of the House has a plan - apparently - that enables the debt-limit "can" to be kicked 6-weeks down the line to Nov 22nd in a "clean" bill that appears dirtied by the lack of a CR for the government shutdown (though including a broader budget talks process). Democrats are already pushing for an end-2014 debt-ceiling extension that McConnell says "wil not fly." We look forward to hearing from Boehner on how this is not a "fold" and how the rank-and-file will agree to this... see you in six-weeks... (and while stocks are incapable of discounting anything that far out, T-Bills are starting to price in that reality). But. U.S. HOUSE REPUBLICAN LAWMAKERS CONCERNED THAT CLEAN DEBT LIMIT INCREASE WOULD NOT FORCE OBAMA TO NEGOTIATE-SENIOR REPUBLICAN AIDE and HOUSE REPUBLICAN LEADERS PLAN TO PRESENT PROPOSED SHORT-TERM DEBT LIMIT HIKE TO WHITE HOUSE ON THURSDAY; WANT TO SEE WHAT OBAMA OFFERS IN RETURN-SENIOR REPUBLICAN LAWMAKER

Jack Lew Ominously Warns "The World Counts On The US To Be Responsible"

Forget about the headlines, the most concerning statement from the entire circus of Jack Lew's hearing was his comment that the world counts on the US to be responsible. It seems that boat sailed a long time ago. The following succinctly summarizes the key aspects of his testimony and the Q&A. As a reminder, Lew noted "Obama did negotiate," denied the chance of "prioritization," and warned that other nations appear ready (and somewhat excited) for the US to falter.

Stocks And USD Surge On Regurgitated House Republicans "Clean" 6-Week Debt-Limit "Can-Kicking" Bill

As we noted last night, finally, it appears that the resolution to the debt ceiling, now due to hit in one week, will be a 6 week can kicking to late November, early December so the whole thing can repeat again, while the government shut throughout according to the GOP proposal, which also means no nonfarm payroll reports for September, October and November:


The USD and Treasury Yield are soaring, US equities are waking up slowly to the news but T-Bills remain unimpressed for now. Bear in mind this was originally reported on October 5th.

Jack Lew Rains Fire And Brimstone Over Debt Ceiling Impasse - Live Testimony

Nearly exactly five years after Hank Paulson appeared before Congress dangling a 3 page term sheet ultimatum warning it was his way or the apocalypse, it is time for the sequel. Since we all love the smell of a good Mutually Assured Destruction spectacle in the morning. Which is why we can't wait for Treasury Secretary Jack Lew's presentation before the Senate Finance Committee discussing the Debt Limit, in which he will rain fire and brimstone on anyone who suggests that the Treasury can enter the X-Date without a debt ceiling deal in place, and will most certainly seek to crucify anyone who points out the logical, namely that payments can be prioritized and interest expense is a fraction the revenue the Treasury brings in, and that the end of the world would be nigh should the US actually be forced to live within its means.