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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Mon, 10/14/2013 - 10:07 | 4052492 Cursive
Cursive's picture

Stupid talkings as we are having always.

- h/t Geruda

Mon, 10/14/2013 - 10:25 | 4052541 CharlieSDT
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.

Mon, 10/14/2013 - 10:32 | 4052560 kliguy38
kliguy38's picture

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

Mon, 10/14/2013 - 10:47 | 4052592 Handful of Dust
Handful of Dust's picture

Is Goldman sponsoring the Million Muppet March this year?

Mon, 10/14/2013 - 12:13 | 4052831 walküre
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.

Mon, 10/14/2013 - 11:08 | 4052660 jughead
jughead's picture

There are no Republicrats or Demlicans, just Idiocrats.

Mon, 10/14/2013 - 10:09 | 4052494 Peachfuzz
Peachfuzz's picture

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

Mon, 10/14/2013 - 10:10 | 4052497 involuntarilybirthed
involuntarilybirthed's picture

A good government would rarely be in the news. 

Mon, 10/14/2013 - 10:17 | 4052510 LetThemEatRand
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.

Mon, 10/14/2013 - 10:19 | 4052521 cossack55
cossack55's picture

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

Mon, 10/14/2013 - 10:27 | 4052543 Headbanger
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??

Mon, 10/14/2013 - 10:17 | 4052512 CPL
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.

Mon, 10/14/2013 - 10:15 | 4052515 onewayticket2
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.


Mon, 10/14/2013 - 12:03 | 4052795 Renewable Life
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??????

Mon, 10/14/2013 - 10:13 | 4052500 Racer
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....


Mon, 10/14/2013 - 10:13 | 4052501 CPL
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.

Mon, 10/14/2013 - 10:15 | 4052505 nmewn
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.




Mon, 10/14/2013 - 10:15 | 4052513 Spastica Rex
Spastica Rex's picture

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

Mon, 10/14/2013 - 10:19 | 4052526 EscapeKey
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.

Mon, 10/14/2013 - 10:29 | 4052551 Spastica Rex
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.

Mon, 10/14/2013 - 10:54 | 4052598 RaceToTheBottom
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..

Mon, 10/14/2013 - 11:43 | 4052742 prains
prains's picture

Yellin keeps clogging the razor

Mon, 10/14/2013 - 10:25 | 4052547 nmewn
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.

Mon, 10/14/2013 - 10:30 | 4052556 Spastica Rex
Spastica Rex's picture


Mon, 10/14/2013 - 10:16 | 4052509 Hedgetard55
Hedgetard55's picture

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

Mon, 10/14/2013 - 10:20 | 4052516 SheepDog-One
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.

Mon, 10/14/2013 - 10:18 | 4052518 EscapeKey
EscapeKey's picture

"Nonfunctioning government building" for sale on Craigslist.

Mon, 10/14/2013 - 10:16 | 4052519 Haager
Haager's picture

Usually Goldman doesn't say what they want.

Mon, 10/14/2013 - 11:15 | 4052672 Singelguy
Singelguy's picture

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

Mon, 10/14/2013 - 10:17 | 4052523 buzzsaw99
buzzsaw99's picture

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

Mon, 10/14/2013 - 10:21 | 4052527 SheepDog-One
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.

Mon, 10/14/2013 - 10:21 | 4052529 Sudden Debt
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

Mon, 10/14/2013 - 10:23 | 4052530 Bay of Pigs
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.

Mon, 10/14/2013 - 10:27 | 4052546 doggis
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!

Mon, 10/14/2013 - 10:28 | 4052549 fonzannoon
fonzannoon's picture

where did Mark Grant go?

Mon, 10/14/2013 - 10:29 | 4052552 adr
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."

Mon, 10/14/2013 - 10:34 | 4052555 Randoom Thought
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.

Mon, 10/14/2013 - 10:28 | 4052557 ShrNfr
ShrNfr's picture

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


Mon, 10/14/2013 - 10:39 | 4052577 RaceToTheBottom
RaceToTheBottom's picture

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

Mon, 10/14/2013 - 10:45 | 4052586 NDXTrader
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

Mon, 10/14/2013 - 10:49 | 4052601 Vooter
Vooter's picture

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

Mon, 10/14/2013 - 11:14 | 4052659 Quinvarius
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.

Mon, 10/14/2013 - 11:28 | 4052705 q99x2
q99x2's picture

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

Mon, 10/14/2013 - 11:29 | 4052707 TrustWho
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.

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