New Trading Week Starts With No Debt Ceiling Deal: Senate At An Impasse, House Isolated
With the House, as previously reported, now out of the debt ceiling negotiations, it is all up to the Senate to reach some compromise with 4 days until the midnight of the first X-Date. Unfortunately, or maybe fortunately, at least going into Monday, there is no deal, and not even a glimmer of what a potential deal may look like. Yes, Democrat leader Harry Reid did said on Sunday that he had a "productive conversation" with Senate Republican leader Mitch McConnell on efforts to reopen the U.S. government and raise the federal debt limit, Reuters reports, but that's as far as it gets. "Our discussions were substantive, and we'll continue those discussions. I'm optimistic about the prospects for a positive conclusion to the issues before this country today," Reid said in remarks on the Senate floor. He did not provide any specifics of the conversation. Democrats and Republicans remain divided over spending levels in any temporary government-funding measure.
Notably, instead of bickering over Obamacare, a topic long since dead and buried (and considering the abysmal, and "glitchy" rollout of the Affordable Care Act over the past two weeks, the GOP may not need to life a finger to crush Obamacare which may end up DOA on its own), the Senate is now debating over spending and funding levels, in a flashback to both 2011 and 2012. Politico reports:
Senate leaders remained stuck Sunday over federal funding levels and the length of an increase to the national borrowing limit as they struggled to cut a last-ditch deal to reopen the government and avert the first-ever U.S. debt default.
With the government shutdown approaching its third week and the country poised to exhaust its borrowing authority Thursday, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell were still trying to hammer out a potential deal. But as of Sunday afternoon, significant hurdles remained, and McConnell slammed Democratic leaders for rebuffing a proposal by Sen. Susan Collins (R-Maine) to end the impasse.
Reid and McConnell didn’t speak by phone until mid-Sunday afternoon, a call that a Democratic source characterized as “cordial but inconclusive.” It was the first time Reid called since the two leaders had met Saturday morning, a GOP aide said.
“Our discussions were substantive, and we’ll continue those discussions,” Reid said on the floor late Sunday afternoon. “I’m optimistic about the prospects for a positive conclusion to the issues before this country today.”
Sen. Chuck Schumer (D-N.Y.), a close Reid ally, said the two men were “moving closer” after their “good talk today.”
Chuck Schumer is best known, of course, for being Wall Street's best paid marionette, and the man who yesterday finally made it quite clear what the stakes were: it's all about the stocks. Alas, judging by where the Futures are about to open, tomorrow will not be a good day for the P&L of either Schumer, or his lobbyists.
As for the market, we are rapidly approaching the debt ceiling deadline, one which Republicans stated yesterday may be crossed:
Monday now will be critical. With financial markets fearful of a prolonged impasse, there is little margin for error before Thursday, when the Treasury Department warns the government will begin to run out of money and could fail to pay its bills for the first time in history. That possibility would intensify a budget crisis that started Oct. 1 when government agencies shuttered for the first time in 17 years because of lawmakers’ inability to pass a funding bill on time.
It’s far from clear how the high-stakes fight will play out this week. Republicans have already dropped their push to gut Obamacare, which prompted the shutdown in the first place. But McConnell has yet to accept Democratic demands for higher spending levels for at least a portion of the current fiscal year.
In other words, as we expected, last week's game of chicken came to a non-resolution far too early. The real outcome will have to literally wait until the 11th hour which may come on October 17, or just after. And following yet another stock market drop that pulls everyone out of the current hypnosis that all is well following last week's headfake 500 DJIA point rally. Yet with bond markets closed tomorrow: so far the only actual market that has been flashing a warning sign in the face of soaring Bill yields and spiking overnight general collateral rates, stocks may be up to their idiotic own once again, and screw everything up as they tend to do in a Ben Bernanke-centrally planned, HFT-momentum ignited market.
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