Goldman: "Headed For A Short-Term Debt Limit Deal"

Tyler Durden's picture

Remember: what Goldman wants, Goldman gets. The only question is whether Jan Hatzius and Bill Dudley have had their talking point convergence meeting over a tasty lobster club sandwich at the Pound and Pence already today...

From Goldman's Jan Hatzius:

Headed For A Short-Term Debt Limit Deal?


Little progress was made over the weekend toward a debt limit agreement, but the remaining issues should not be that difficult to resolve. Lawmakers are aiming for an agreement by October 17, but whether that happens just before or just after that deadline, we expect the debt limit to be raised before there is a risk of missed payments.


1. The main sticking points are how to address sequestration and whether any other policy changes might be attached. The latest obstacle to a deal is the disagreement on what the spending level should be once the government reopens. The spending level on non-emergency "discretionary" activities through September 30 was $986bn. In attempts to avoid a shutdown in late September, the House and Senate both passed legislation to continue spending at that level. Over the weekend, this issue appeared to present a new challenge, as Republicans focused on $967bn (the level that would be in effect once the slightly deeper 2014 sequester cuts take hold) and Democrats focused on $1058bn (the level that would occur in 2014 without any of the cuts under sequestration). A secondary issue is that Republicans are likely to seek at least some small concession related to the Affordable Care Act (also known as "Obamacare"). At this stage, this has been narrowed down to a delay in the medical device tax, increased income verification for subsidies under the program, or elimination of program subsidies for Congress.


2. A two or three month deal might be the easiest to enact. As we recently noted, recent negotiations have ranged from an extension of six weeks to one year. If a longer-term agreement on the appropriate spending level cannot be reached, the path of least resistance may be to enact a shorter-term extension of spending authority and the debt limit lasting two or three months. This would allow congressional leaders to sidestep the sequestration issue in this round of talks, since the cuts do not take effect until around January 15, 2014. In the interim, Congress would then try to replace some of the cuts under sequestration with other sources of budgetary savings (i.e., from "mandatory" spending such as entitlement programs or revenues) spread over ten years. Given the amounts in dispute--the incremental cut that takes effect in January is $21bn in budget authority compared with the level that was in effect before the shutdown occurred--an agreement to change sequestration appears to us to be within the realm of the politically possible.


3. A deal in principle could be reached in the next few days, but going slightly past the October 17 deadline is entirely possible. An agreement in the Senate looks likely over the next few days. Procedural hurdles in the House and particularly the Senate often cause delays, but usually don't result in missed deadlines if a political agreement is in place. That said, if a bipartisan deal is reached in the Senate, getting the bill through the House would still be a tricky proposition and Republican leaders may not want to put such a bill to a vote until other options have been exhausted. Lawmakers have taken the October 17 deadline surprisingly seriously, probably because the media have focused on October 17 as the date at which a "default" could occur. This is inaccurate, but might help a deal to be reached sooner rather than later. On October 17, the Treasury becomes constrained by the debt limit and can no longer borrow. However, the Treasury expects to have $30bn in cash on that date, which it could still use to finance the difference between revenues for several more days, and perhaps longer. Given how much lawmakers have narrowed their differences, it is very difficult to imagine a stalemate lasting until Treasury's cash has been depleted and its ability to make payments is put at risk. That said, last week we believed it was possible that the final agreement might not be reached until slightly past October 17 and that still looks possible based on where things stand this morning.

Of course, Obama may not be happy with this outcome (to say the least), but with 2 days left, he doesn't have much if any choices left. And now, risk ramp. Just as expected.

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Cursive's picture

Stupid talkings as we are having always.

- h/t Geruda

CharlieSDT's picture

Today, after years of watching the two political parties do the exact same shit over and over again, it just boggles my mind that anyone with half a brain could think there there are actual good guys and bad guys in Washington. Normally intelligent people are parroting all the same stupid partisan talking points they read on the Huffington Post or Fox News and getting very angry at anyone who disagrees with their finger pointing game.
It is amazing what a bunch of dumb fucks the Americans are these days. How it is possible that people with IQs over 80 can live in the same world as you and I and still insist that there is any difference between Republicrats and Demlicans is beyond me. Believing in the Red Team Blue Team meme today shows the same critical thinking ability of a pro wrestling fan that insists that that shit is real.

kliguy38's picture

NO deal......that's the message from GS

Handful of Dust's picture

Is Goldman sponsoring the Million Muppet March this year?

walküre's picture

Gotta wonder what GS et al does when IMF steps in front, center stage to rescue the US government under the condition that IMF gets access to all US bank deposits.

GS has a couple dogs in this fight. How are they supposed to charge fees when IMF technocrats seize their client's accounts?

Then again, it is GS. They will probably have a fee structure on bail-ins.

jughead's picture

There are no Republicrats or Demlicans, just Idiocrats.

Peachfuzz's picture

Fuck a pound and pence, when you can get steak and lobsta fo 66 cents bitchez!!!

involuntarilybirthed's picture

A good government would rarely be in the news. 

LetThemEatRand's picture

And Goldman Sachs wouldn't be telling us about what said government is going to do next.  Keep in mind that they were given special audience with His Majesty last week.

cossack55's picture

You are presuming, perhaps, that GS isn't the gubmint.

Headbanger's picture

Great!  Cause GS goes poof  along with DC!

I wonder what dish can be made from vampire squid at The Pound & Pence??

CPL's picture

Yup.  The mechanism should be so fluid and low key that people barely note the services provided.  But since the entire world is 'special case' that won't happen.  Everything is a bush fire which leaves zero time for real operations and delivery of services.

onewayticket2's picture

by trying to pass insanely one sided budgets (that fail, repeatedly, without a single vote from either side), the Obama admin appears to want this strategy of letting Congress fight it out publically and of dividing the country - living crisis to crisis.  Anti leadership on the issue creates turmoil....


this is community organizing at the Federal level.  create a void and televise the conflict via your pals in the media.


Renewable Life's picture

So I think I've been slowly migrating toward this position over the last three years, hoping for another solution to emerge, but it appears to me at this point to be the only way forward!

I think the only check on federal power, at this point, is secession! In particular I think Texas and Alaska are the only two States in position politically, historically, logistically, and economically to succeed in doing so!!

My family was in the revolution in this Country and helped build this nation, so it's sickening to think this is where we are, but what else is left, that is peaceful and democratic??????

Racer's picture

Time to put in place a new debt target as Biden says they have to spend money to save from going bankrupt....


CPL's picture

Involving goldman doesn't fix being broke, nor does it hinder the situation.  It's just going to happen whether they like it or not.

nmewn's picture

So the sun rises again only to to find, the crony socialists are still holding a gun to the nations head, demanding moar national debt and less freedom for all.

Shocking, I know.




Spastica Rex's picture

Private banks are socialist? Or are they not the ones with the guns?

EscapeKey's picture

Lemon socialism is a term for the practice in supposedly free market capitalist economies in which the government steps in to bail out or otherwise subsidize weak or failing firms.[1][2] A government attempting to transition from capitalism to socialism by this method takes control of the worst industries — the "lemons" — first, which undermines such an approach.[3]

It is also a pejorative term for government support of private-sector companies whose imminent collapse is perceived to threaten broader economic stability.

Spastica Rex's picture

Is it a particle, or a wave?

OMG - can it be both?!

In the end, is it important to identify whether tyrants are aligned first with government or with private capital? I tend to think no. Right tyrannies and left tyrannies are still in the end just tyrannies - and they really look pretty much the same. Fixing blame on one side of the (false, IMO) one dimensional political spectrum just divides the prols.

RaceToTheBottom's picture

Everyone should print a summary of that post with lipstick on their mirror in the bathroom.  They need to be reminded of that every morning when they shave or put makeup on, or both..

prains's picture

Yellin keeps clogging the razor

nmewn's picture

The entire stock market is a fascist-socialist manifestation these days.

When you've got Chuck Schumer (Wall Street banker shill extraordinaire) worried about "the stock market" tanking unless moar national debt is fed into the furnace, its really all we need to know.

There is no risk of lent capital as long as that spigot is on...thats not capitalism...its something else.

Hedgetard55's picture

Hope they had a nice Vermentino from Sardinia with that lobstah.

SheepDog-One's picture

Why don't they just announce the new debt limit is 11enty gajillion$ and then we have no more problems easy as that? The media would cheer, that I know. It's all nothing but a puppet show anyway.

EscapeKey's picture

"Nonfunctioning government building" for sale on Craigslist.

Haager's picture

Usually Goldman doesn't say what they want.

Singelguy's picture

Correction, Goldman says what it wants knowing that the sheeple will listen and then does the opposite to profit from it.

buzzsaw99's picture

does this mean that we are encouraged to trade more actively?

SheepDog-One's picture

If by 'trade' you mean put more money within the hooked claw hands of Wall St central banksters, then yes I suspect that's what this means.

Sudden Debt's picture

A partial debt limit deal doesn't cut it anymore now that the spotlights are on centerstage.

The monkey's are starting to realise that next year we'll have the same shit and that problems will be bigger once again.

Even on Titanic there where people who only said "SHIT" after the ship broke in two

Bay of Pigs's picture

OT, BlowHorn [CNBC] acknowledges "paper gold" selling while the Chinese buy "physical" hand over fist.

Their advice? SELL gold until "inflation arrives" with 'economic growth", then buy. Gold to sub $1000 according to them.

doggis's picture



this is how i decode it.

There will be NO DEAL before 10/17. GS has taken every opportunity to get on the winning side of the "technical default" trade.

[fidelity/jpm, etc sold out of t/bills for oct AND NOV.] hmmm..


do as they do, rather than as they say!

fonzannoon's picture

where did Mark Grant go?

adr's picture

I think some members of congress are looking at the can and seeing it is pretty beat up. Saying, "Sir, this thing looks pretty beat up. If we kick it again it might fall apart."

Someone else says, "But that's the point. Kick it again and kick it hard. If it breaks we can get a new can. Maybe a nice red one with a hammer and sickle. Yes that can projects strength and unity. It is a much nicer can than our beat up American can."

Randoom Thought's picture

Another Goldman article? Yawn. I mean really, doesn't Goldman have a better vehicle to get their propaganda out than ZH. How about the WS Urinal? Granted, I gave up reading the urinal years ago ... but then again, I am not the type of person they want to con anyway.

ShrNfr's picture

Meanwhile the "clients" clean out the shelves in Walmart on their EBT cards.


RaceToTheBottom's picture

I hate, with a passion, anything and everything GS does.

NDXTrader's picture

I guess everyone is just expecting that whatever bullshit Reid and McConnell agree to will be the deal. Boehner will have to get a majority of Republicans in the House to go along or he is done. I guess it is expected that the media pressure will be so intense that they dare not say no

Vooter's picture

"Keep that motherfucker here...keep him here!"

Quinvarius's picture

You can scratch another possible outcome off your list.  GS will never get the fundamentals of any trade right.  They are dreamers.  If it isn't rigged, a fraud, or a bailout, it isn't going to happen for them.

The only question is what will the President agree to give up just before midnight on the last day.  If he agrees to nothing, America wins and the Washington whorehouse takes a dive.

q99x2's picture

Throw Goldman Sachs into prisons around the world and let's prosper already.

TrustWho's picture

GS post comments to make money. Truth is excluded when GS's money is involved. Obama wants chaos so he can take control. Liberal democrats, using traditional definition of liberalism, no longer exist.