In the aftermath of Kevin McCarthy's surprising announcement yesterday that he would quit the race for speaker after reportedly telling House Republicans that he is not the one to unite the House Republicans following reports that he did not think he had the 218 votes necessary for the October 29th House vote, the GOP has been in disarray.
According to Reuters, Friday morning House Republicans met behind closed doors "to discuss next steps in their internal leadership battle on Friday morning, the day after the front-runner to lead their chamber abruptly quit the speaker's race."
"Starting this morning, we're looking for a consensus candidate," Representative Darrell Issa told CNBC ahead of the meeting.
It won't be easy: finding a replacement for House Speaker John Boehner has consumed Republicans as Congress faces a series of pressing decisions, from raising the government borrowing authority to funding federal agencies through September.
Further complicating matters is that the House of Representatives is set to take recess next week.
Meanwhile, the power moves behind the scenes have begun. With House Ways and Means Committee Chairman, Paul Ryan, repeatedly saying he would not run, the richest member of Congress, California's Darrell Issa said he was considering running.
"I could potentially be a candidate," Issa said in a separate interview on MSNBC. If no clear candidate emerges, he said, House Republicans should look at replacing all of their leadership positions. Other candidates include Representatives Daniel Webster of Florida and Jason Chaffetz of Utah.
As Reuters reports, Webster has the backing the House Freedom Caucus, a group of about 40 members aligned with the Tea Party movement that calls for lower taxes, less federal spending and reduction of the national debt and budget deficit. Walter Jones, a Republican congressman from North Carolina, on Friday said he supported Webster for the job even as he acknowledged the long odds he faces to win.
"Obviously there's chaos up here right now, and we're going to have to see how it works out," he told CNN.
But while the republicans are optimistic they can circumvent the chaos, others are less sanguine.
The problem, as we explained yesterday, is that there is very little time left before Congress has to decide on how to boost the US debt ceiling, which we breached months ago, and which has just under a month left of "emergency" funding measures left before all the money runs out and the government is forced to prioritize payments, unleashing a rerun of the summer of 2011 when markets tanked on debt ceiling fears and when the US was downgraded by S&P.
As Stone McCarthy calculated, latest projections show the US Treasury with less than $2.0 billion left in its toolkit in the week that starts November 2. Given the uncertainty surrounding these projections that's tantamount to the extraordinary measures being exhausted. Treasury Secretary Lew in his letter said Treasury expects to use up its extraordinary measures "on or about" November 5.
This however, assumes that the GOP will be able to "rise above" the gridlock and elect a speaker who is palatable to everyone, including the vocal Freedom caucus.
So as the posturing for GOP leader takes off over the next 20 days, the biggest problem remains: what happens to the US debt ceiling negotiation when considering that as of this moment the US Treasury has $60 billion left in total available funding.
One answer comes from Bank of America's Lisa Berlin whois not very optimistic.
It is possible that current Speaker Boehner stays in his current role for slightly longer, but he is unlikely to reverse his resignation, in our view. Paul Ryan, who may have been another option for Speaker, has been adamant that he is not interested in the job. House Republicans will need to find a new nominee to be Speaker and, at this point, it is unclear who would have broad enough support to be elected.
In our view, this event may make a debt limit increase more difficult to achieve and likely increases the risk of a shutdown in December. It shows the strength of the Tea Party and allied conservatives within the House. These representatives will likely seek significant concessions from the White House and Democrats for raising the debt limit and reaching a budget agreement. The White House, however, has previously indicated that it would favor a "clean" increase in the debt ceiling.
And so the countdown begins to November 18 when SMRA calculates, just before a $14.2 billion in Social Security benefits payments, the US Treasury runs out of all cash.
Keep an eye on T-Bill yields for the turning point when the market decides this situation is becoming serious.