Wall Street is listening to the 'debt ceiling chicken' meme and not liking what the Tea Party and Republicans are saying about messing around with it. John Boehner does understand the ramifications of not raising the debt ceiling, but unlike pushing the government shutdown to the limit, doing the same to the debt ceiling will have a much more catastrophic impact.
Republicans are growing increasingly concerned about the impact a bruising fight over raising the nation’s $14.29 trillion debt ceiling could have on U.S. financial markets.
House Speaker John Boehner (R-Ohio) has had conversations with top Wall Street executives, asking how close Congress could push to the debt limit deadline without sending interests rates soaring and causing stock prices to go lower, people familiar with the matter said. Boehner spokesman Michael Steel said Tuesday night that he was not aware of any such conversations.
Treasury Secretary Timothy Geithner has warned Congress that without new borrowing authority, the federal government could hit the statutory debt limit by May 16.
The Wall Street executives say even pushing close to the deadline — or talking about it — could have grave consequences in the marketplace.
“They 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.
Jamie Dimon is a blowhard of epic proportions and one of the richest and biggest whiners coming out of Wall Street, but politicians do bow down to these folks and he issued a threat aimed at Boehner and his cohorts this time.
"If anyone wants to push that button ... I think they're crazy," Jamie Dimon, the chief executive of JPMorgan Chase, said recently at the U.S. Chamber of Commerce.
Clearly Boehner is angling to find out how much time he has so he can get as much out of the White House as he can and clearly needs to deal with the Tea Party Caucus over raising the debt ceiling.
Obama was just given a huge negotiating advantage no matter what comes out of the mouths of Republicans. The question is will he use it? We know that the Amy Kremer Tea Party fanatics won't care how the debt ceiling affects the country, but maybe Dimon's response will throw some anger Wall Streets way for a change from the Tea Party since they are free market addicts and pray to the alter of the tax cut. I wouldn't count on it, but I can dream a little.