The combination of another debt limit fight, the defunding of Planned Parenthood, and prospect of another government shutdown tearing his party apart, the GOP just suffered its latest major blow, when news hit that House speaker John Boehner, just 24 hours after getting a visit by none other than the Pope, is folding one last time:
- BOEHNER TO RESIGN FROM CONGRESS, GIVE UP HOUSE SEAT IN OCT: NYT
Speaker John A. Boehner will resign from Congress and give up his House seat at the end of October, according to aides in his office.Mr. Boehner was under extreme pressure from the right wing of his conference over whether or not to defund Planned Parenthood in a bill to keep the government open.
Boehner aide's full statement on impending resignation. Comes amid rumblings of conservative coup. pic.twitter.com/ZB3IY8xdbC [8]
— Benjy Sarlin (@BenjySarlin) September 25, 2015 [9]
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— Damian Paletta (@damianpaletta) September 25, 2015 [10]
And the market knows it...
[11]
Here is Goldman's take on the surprising announcement:
- Boehner plans to step down as House Speaker and resign from Congress at the end of October, according to several reports. This comes following pressure from conservative members of his caucus to block an extension of government funding due to the controversy over Planned Parenthood. Members of Congress will elect his replacement as Speaker after he leaves his position. Many view current Majority Leader Kevin McCarthy as a likely replacement.
- In our view, this significantly reduces the probability of a government shutdown next week. The Senate is expected to pass legislation on Monday (Sept 28) to extend spending authority, probably to December 11. Speaker Boehner was under pressure not to accept this “clean” extension of spending authority (i.e., one that did not include changes to Planned Parenthood funding). His resignation, expected at the end of October (i.e., after the funding extension has passed), is in our view a strong signal that he plans to bring the clean extension up for a vote despite opposition from House conservatives. In essence, this announcement is meant to preempt the expected attempt to remove him from his position after he extends spending authority.
- The next relevant question for financial markets will be how this affects the debt limit and other pending issues. There is a clear possibility that the vote next week, which was initially expected to deal just with the extension of spending authority, could instead also address other issues like an extension of the Export-Import Bank and, possibly, even an extension of the debt limit, which we believe will need to be raised before Congress adjourns for the Thanksgiving break in late November.
And here is BofA:
Boehner has been vocal about avoiding a shutdown. With the timing of this announcement shortly ahead of the budget deadline next week, we expect that Boehner's resignation will allow him to work across party lines to pass a continuing resolution. In our view, this decreases the chances of a shutdown next week.
Boehner's resignation may increase risks of brinkmanship going forward. His replacement may have more difficulty generating consensus when the debt ceiling becomes a more urgent issue in November or December and when a potential continued resolution likely expires in December.
In our view, the market is likely to look through brinkmanship as it did in 2013. A shutdown may impact growth, but we expect the effect to be limited. This does shift risks of turmoil out toward the December Fed meeting, when we expect the Fed to raise rates. Still, we think the Fed is likely to look through any brinkmanship unless there is a large, unanticipated shock.
Elections will be held for a successor. It is expected that House Majority Leader Kevin McCarthy may be elected for the role. House Financial Services Committee Chair Jeb Hensarling and Freedom Caucus Chair Jim Jordan are other potential candidates.
