Editore"s Note
Tilting at Windmills

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April 13, 2011

BOEHNER WANTS WALL STREET PERMISSION TO PLAY A DANGEROUS GAME.... When drawing up a list of those eager to see Congress raise the debt ceiling, we tend to think of certain groups: Democrats, economists, Federal Reserve officials, Treasury officials, the mentally sound, etc.

But let's not forget that the financial industry -- not exactly a close ally of the Obama White House -- feels as strongly about this as any other entity. Jamie Dimon, the CEO of JPMorgan Chase, recently said anyone willing to risk such "catastrophic and unpredictable" consequences is "crazy."

With this in mind, House Speaker John Boehner (R-Ohio) has reportedly reached out to Wall Street, asking how much wiggle room he has to play partisan games for a couple of months without doing significant damage to the American and global economy. He probably didn't care for the response.

The Wall Street executives say even pushing close to the deadline -- or talking about it -- could have grave consequences in the marketplace.

"[Conservatives] don't seem to understand that you can't put everything back in the box. Once that fear of default is in the markets, it doesn't just go away. We'll be paying the price for years in higher rates," said one executive.

Another said that "anyone interested in 'testing' the debt ceiling should understand the U.S. debt traded wider [with a higher yield] than Greek debt roughly five years ago. Then go ask CBO what happens to our deficits/public debt to GDP, if the 10-year [Treasury bond] goes from 3.5 percent to 5.5 percent to 7.5 percent." The executive said such an increase would result in a downgrade of U.S. debt by ratings agencies and an end to the dollar as the standard global reserve currency.

As recently as yesterday, House Majority Leader Eric Cantor (R-Va.) said he's prepared to push off any congressional work on this until after the United States government hits the debt limit in mid-May, but before we exhaust our ability to borrow money around July 8. In other words, Cantor is inclined to wait for the crisis to get underway, and then think about resolving it.

It's the exact opposite of what the financial industry considers wise. Indeed, Boehner realizes this -- implicit in his outreach to Wall Street is the understanding that raising the debt limit is necessary; he just wants to know if he has some time screw around for a while.

Sen. Chuck Schumer (D-N.Y.) took the right line this morning, "The Speaker seems to be testing out how far he can venture onto a frozen lake before the ice breaks. He should listen to business leaders who are telling him to watch his step. Messing around with the debt ceiling just to satisfy the Tea Party will lead to higher interest rates and an economic cataclysm."

I suppose we'll see soon enough whether there are limits to Republican nihilism.

Steve Benen 1:00 PM Permalink | Trackbacks | Comments (21)

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I suppose we'll see soon enough whether there are limits to Republican nihilism.

Not if Obama caves first.

Posted by: bleh on April 13, 2011 at 1:01 PM | PERMALINK

i'm not sure you can use "Cantor" and "think" in the same post, let alone the same sentence.

Posted by: mellowjohn on April 13, 2011 at 1:13 PM | PERMALINK

DO it do it do it! You are SO overreaching GOP that you will be finished for DECADES! It's NOT a principled stand. A principle stand is to see how we can reduce spending and increase revenues. It's tough for the GOP but we call it ECON 101 outside the Beltway!

Posted by: SYSPROG on April 13, 2011 at 1:15 PM | PERMALINK

Wall St. just has to cut off financial support from the Republicans, and be vocal about it. Maybe even threaten to fund Democrats in the next election cycle. This is pretty easy. But, being the greedy B**t***s they are, they won't think of this. They all need to be called out on their terrorist activities, in the public square.
Slightly OT: I wonder how many of the banksters are involved with the Mafia. There is a very interesting trial going on right now, with a high-ranking "Mafia boss" testifying in violation of his sacred oath to The Family. "Joseph Massino took the witness stand at the Brooklyn trial of Vincent "Vinny Gorgeous" Basciano, who served as one of his captains in the Bonanno crime family. Prosecutors say that Massino secretly recorded Basciano admitting he ordered a hit on an associate who ran afoul of the secretive Bonannos." By TOM HAYS, Associated Press Tom Hays, Associated Press - Tue Apr 12, 8:49 pm ET Read the Comments: most of them are accusing the U.S. gov't. of being the modern version of the Mafia.

Posted by: st john on April 13, 2011 at 1:19 PM | PERMALINK

For those "prescient" Wall Street investors who contributed millions to demote Speaker Nancy to minority leader, this could be an interesting "return on your investment."

Posted by: Ray Waldren on April 13, 2011 at 1:21 PM | PERMALINK

Call the bluff. This one is easy, just call the bluff.

The further out on the ledge they crawl, the better.

Posted by: danimal on April 13, 2011 at 1:25 PM | PERMALINK

He probably didn't care for the response.

Did he start to cry?

Posted by: SWENXOF on April 13, 2011 at 1:27 PM | PERMALINK
Not if Obama caves first.

This.

And if Boehner can be believed (yeah, I know, and I hope he's lying), he has already offered to.

Posted by: Steve LaBonne on April 13, 2011 at 1:33 PM | PERMALINK

The Tea Party wing of the Republican blimp is a minority interest intensely focused on issues they hold as non-compromise matters!

They are holding the Republican leadership hostage, and John Boehner is displaying an intensification of the Stockholm Syndrome, where he seemingly can only trust his kidnappers, even in light of more sane and certain sources trying to reason with him! -Kevo

Posted by: kevo on April 13, 2011 at 1:38 PM | PERMALINK

Glad to see Republicans so concerned for the "uncertainty" of the financial and business community.

Posted by: Ted Frier on April 13, 2011 at 1:41 PM | PERMALINK

I'd like to wait and see.

Republicans spin everything as "their" victory.

Of course the lying Republicans will say anything about Obama, "caving" being the least of their multiple epithets, from Hitler to Stalin to Kenyan to space alien. I would not believe one word they say about what he said.

Posted by: jjm on April 13, 2011 at 1:42 PM | PERMALINK

You know there is always a chance they will actually shutdown the government, but we know what happens when the government is shutdown. We only have computer models to tell us how bad the economy becomes if America defaults. The upside senario makes the Great Recession look mild by comparison. The funny thing is that Obama doesn't have anything to negotiate. This is all on Boehner and Mitch McConnel. Not sending the President a clean bill in a timely fashion will end their careers and the careers of every Republican (and probably every Democrat) in Congress. Ending the "careers" of some congress critters would be the least of America's problems.

Posted by: Ron Byers on April 13, 2011 at 1:45 PM | PERMALINK

KABUKI!!!

Let's hope Obama decides not to dance, or forgets the steps.

The Galtian Overlords are doing great. They don't want to lose a penny right now, or in the future.

Posted by: c u n d gulag on April 13, 2011 at 1:48 PM | PERMALINK

This is why I've never been concerned about this particular bluff. The only thing that scares Republicans more than Teabaggers are our corporate overlords. If Obama can resist the urge to cave before negotiations begin, then the CEOs will do his work for him. Republicans will change their tune quickly.

Posted by: taritac on April 13, 2011 at 1:49 PM | PERMALINK

The asymmetry - a topic we visit a lot here, is strking.

Republicans can travel overseas [i know, a very few do] and trash talk US foreign policy, trash talk the president, basically violate the old "partisianship ends at the waters edge" shibboleth, and get no blow back.

Now Boner boy goes to suck who knows what with the Wall street folks.

But if Dem makes a comment about Bush's wars, or has the audacity to - talk to some democratic leaning interest group, there is hell to pay by the corporatist media.

So boney can tip toe to Wall street, and basically ask " how far can I go to F*** the country before you get mad at me" - and there will be no consequence. None.

In a ideal world, this would result in the Sec. Treasury and a President no longer returning his calls....

a boy can dream, can't he?

Posted by: bigtuna on April 13, 2011 at 1:58 PM | PERMALINK

Has he asked the Kochs what they want? What the US Chamber of Commerce wants? What Fox wants?

Posted by: ComradeAnon on April 13, 2011 at 2:11 PM | PERMALINK

THE GOP IS GOING TO RAISE THE DEBT CEILING. Period. If theyd don't - they will - but IF they don't - which they will - the GOP will have committed suicide. They will have lost big business, anyone with money, and in the end, the Tea Party.

Obama should ask for a clean bill now - not when it endangers the market, and demand having the argument before it becomes a crisis so that it is obvious (as if it weren't already) who wants this crisis, and then have their Wall Street funders making threats and angry calls as the deadline approaches.

And the whole time, taunt them about how chicken they are not to hold firm, so that when they do fold - and they will - they look that much more weak-kneed.

Posted by: Memekiller on April 13, 2011 at 2:14 PM | PERMALINK

When the tea-partiers' economic ignorance collides with the desires of the people who pay for political campaigns, it could get interesting for party "leaders" figuring out who they'll have to follow. I'd almost feel sympathy for Mr. Boehner, if it wasn't for the fact that he invited this situation.

Posted by: TG on April 13, 2011 at 3:17 PM | PERMALINK

I'm going to go out on a limb and say, "No. There aren't any limits."

They are just that stupid.

Posted by: Four Legsgood on April 13, 2011 at 4:36 PM | PERMALINK

SYSPROG... I can't cheer the Republicans on, even in jest. Even if it destroys their party for a generation (and I think the American attention span is too short for that to happen) the damage to the country as a whole would be too great.

And Wall Street is right for once. The Republican Party's biggest fear-mongering tactic about reducing the deficit is to claim that if we don't start doing something about it RIGHT NOW the markets will panic any day now and raise the interest rates we have to pay on it.

The reality is that there is no sign our debt levels are getting close to the point where that will happen, thought it is a concern for the long term. However, even threatening to not raise the debt limit, as Republicans are doing now, has the potential to bring about the same disaster they claim they are trying to avoid. Much more certainly and much, much sooner.

Posted by: tanstaaffl on April 13, 2011 at 7:18 PM | PERMALINK

"a boy can dream, can't he?"
Posted by: bigtuna on April 13, 2011 at 1:58 PM

No.

Posted by: Boehner, Cantor, & GOP, Inc. on April 13, 2011 at 8:04 PM | PERMALINK
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