Wall Street Explain Why Markets Ignored Trump's Threat To Veto "Disgraceful" Stimulus Billl

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by Tyler Durden
Wednesday, Dec 23, 2020 - 09:19 AM

For about a day, it seemed that the Covid stimulus bill - full to the gills with billions in pork as described here - was set to pass and normalcy would return to Congress where lobbyists and special interests would once again regain control over the "democratic" process... when Trump stunned everyone late on Tuesday when - at the very last moment when - among other things he called for higher stimulus payments ($2,000 rather than the agreed $600) for individuals, while demanding that "wasteful and unnecessary items" be eliminated.

In response, top House democrat Nancy Pelosi tweeted that Democrats are ready to bring $2,000 in direct checks to the Floor this week by unanimous consent, although it was unclear just where the additional funding would come from and what would happen to the tens of billions in pork in the bill.

In any case, while Trump did not outright say that he would veto the current stimulus bill, which the House and the Senate could in turn override with supermajority votes, there is a risk of a so-called pocket veto. If this bill isn’t on the President’s desk by the end of Wednesday, he could effectively veto it by keeping it in his "pocket" for the next ten days. The President is given this exact ten day window, Sundays excluded, to either sign or veto a bill, but the current Congressional session will end on January 3. After that date, the President simply cannot return the bill to Congress.

In other words, if Trump fails to veto the bill in ten days (Sundays excluded) the bill would automatically become law.

It's also why the initial jolt lower in futures reversed entirely overnight, as analysts said investors shouldn’t worry about Trump’s attack on the pork in the coronavirus relief package as the president can only delay passage by about a month, while his prodding might in fact boost checks to individuals.

As Vital Knowledge founder Adam Crisafulli wrote in a note, Trump’s criticism, and implicit veto threat, "won’t alter the macro narrative" and that "even if Trump actually vetoes (unlikely) and Congress fails to override it (also unlikely, given the stimulus/budget passed with veto-proof majorities), this will only delay the inevitable by 27 days (which would be unfortunate, but not material).”

"The big debate isn’t whether the $900b stimulus gets passed into law but instead if it represents a ‘down payment’ or the last major fiscal response to the pandemic,” with the outcome of Georgia Senate races in early January playing a “big role in answering that question”, Crisafulli explained.

Meanwhile, adding to the bullish case, FiscalNote’s Stefanie Miller wrote that it’s "possible that the public pressure from the president could in fact yield an additive policy to enact higher rebate checks." Even so, she doubted any changes would be made to the “underlying package awaiting Trump’s signature – meaning it’s unlikely in our view any other of Trump’s demands are met.” Ultimately, she said Congress is highly likely to override a veto, as the policy has already been approved by both Chambers with veto-proof majorities.

Finally, Raymond James analyst Ed Mills’ base case remains that the bill passed by Congress will become law, as the package passed both the House and the Senate with veto-proof margins, and $2,000 payments have no support among Republican lawmakers. He added that Trump’s “demand is arguably a net positive for Democrats’ chances in the Georgia Senate races, as Republicans will be forced on the defensive."

In other words, all that has happened is that Americans will almost certainly get the $600 stimulus checks, only with a several week delay.