McCarthy To Resume Debt Negotiations Tonight, Vows To Block Biden Push To Increase Spending
Update (1820 ET): House Speaker Kevin McCarthy said he expected negotiations to avert a US debt debt default will restart Friday night.
“It’s true that we took a pause because of the frustration that this White House will not acknowledge that they’re spending too much,” McCarthy said in an interview with Fox Business. “The White House will not budge.” But, he added, “We’ll be back in the room tonight.”
The House Speaker also said that Biden invoking the 14th amendment wouldn't solve any problems, and added that he "vows" to block any Biden push to increase spending.
McCarthy’s remarks come after a turbulent few days for negotiations. One day after McCarthy said he expected a deal on the House floor next week, GOP negotiators walked out of talks with White House officials, an "abrupt" and "unexpected" reversal from optimistic signals on progress from both sides a day earlier, which was just posturing. The Republican team’s departure from the closed-door session about an hour after it began Friday morning threw into doubt the status of talks to avoid a US default.
According to Bloomberg, there was not a dramatic flare-up in the room before negotiators left, according to one person familiar with the negotiations. Another person familiar with the talks said it wasn’t a specific issue but ranged broadly across GOP budget-cutting demands.
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Yesterday, when explaining the real reason for Thursday's tech-led meltup - which for those who missed it was the biggest call buying spree-cum-gamma squeeze since 2014...
... we mocked those idiots who blindly parroted the ridiculous narrative that debt ceiling talks were "going well" (once again for the very cheap seats: "We Won't See A Debt Ceiling Solution Until The Market Panics") for the simple reason that, as we went on to say, there would be NO DEAL until the market freaked out, to wit:
But before someone idiotically tosses that today's meltup was because of more good news on the debt ceiling negotiations (there was zero news, neither good nor bad, and we hate to break it to you but there will be no debt ceiling deal until after the market freaks out, so enjoy the frenzied rush higher), the primary explanation for today's move was simple: the biggest nasdaq gamma squeeze since 2014!
Well, today the idiocy continued and there were those who once again blindly parroted the narrative that debt ceiling talks are going great and debt deal optimism is pushing stonks higher.
Just one problem...
... it was - as we warned repeatedly - all a lie, and moments ago Bloomberg reported what we all know would come out sooner or later (it ended up being sooner), that the talks have pretty much collapsed after House Speaker Kevin McCarthy’s top debt-ceiling negotiators "abruptly left a closed-door meeting with White House representatives soon after it began Friday morning, throwing the status of talks to avoid a US default into doubt."
“Look, they’re just unreasonable,” Republican Representative Garret Graves said, adding that the talks were on a “pause.” He added that he did not know if the negotiators would meet again Friday or over the weekend, which is a problem because as we showed last night, the Treasury cash is now down to just $18 billion away from the Treasury's critical cash level of $50BN, and at this rate, the Treasury will run out of cash in a few days.
“Unless they are willing to have reasonable conversations about how you can actually move forward and do the right thing, we’re not going to sit here and talk to ourselves,” Graves said, as House Financial Services Committee Chairman Patrick McHenry stood near him.
Graves’ comments come one day after McCarthy said he could see a deal coming together with a House vote next week (narrator: he was only jawboning for political purposes; there will be no deal next week). And yet, the 19 year old woke portfolio managers took McCarthy’s comments as his most positive yet on the negotiations to avoid a default, and bid risk up like the useful little liquidity providing idiots they are.
Fox confirmed BBG's reporting:
2) Fox is told there is a lack of movement between the sides over what Republicans want to cut on the “discretionary” side of the ledger. This is the part of spending which Congress controls through the appropriations process each year.— Chad Pergram (@ChadPergram) May 19, 2023
4) Meantime, Republicans are sticking to their position of wanting to increase defense spending.. which is the largest portion of overall discretionary spending – accounting for more than half.— Chad Pergram (@ChadPergram) May 19, 2023
So, that has led to the impasse.
5) Steep cuts to entitlement programs – which make up the bulk of all spending (close to 70 percent) are off the table. So the only place to go are toward entitlements.— Chad Pergram (@ChadPergram) May 19, 2023
“There is too much daylight between the sides,” said one GOP source.
Stocks naturally tumbled on the Bloomberg news, with the S&P 500 Index down 0.2% as of 11:30 a.m. in New York. That’s despite Federal Reserve Chair Jerome Powell having said, at a separate event, that the central bank might not need to raise interest rates as high —thanks to potential credit tightening after recent issues in the banking sector.
Elsewhere, 2Y yields plunged, reversing all of the days move and then some...
... as June rate hike odds were monkeyhammered...
... while gold - which for some bizarre reason had been sold on "DeBT tALkS OptiMiSM" - soared.