Top Republican congressional leaders have written to the Federal Reserve urging the central bank’s officials to “resist further extraordinary intervention in the US economy”, the WSJ reports, ahead of the FOMC meeting this week. The letter was sent on Monday to chairman Ben Bernanke by House speaker John Boehner, Senate minority leader Mitch McConnell, and two other Republican leaders. It said any further efforts by the Fed could “exacerbate current problems or further harm the US economy”. Reuters says the Fed looks set to launch “operation twist” measures regardless, in what could be the first in a series of incremental steps to foster stronger growth.
As we noted earlier, President Obama’s speech was perhaps a little too hotly anticipated, given the political constraints it faces.
And markets were not deeply impressed — Asia’s main indices were up less than 0.5 per cent, and that’s with Chinese consumer price inflation slowing as expected. Treasury yields and crude oil futures were up, but again, just a little. Read more
Republican leaders in the House of Representatives are scrambling to quash a rebellion among some of their rank-and-file members over opposition to the party’s plan to raise the debt ceiling as the US continues to veer towards a possible default, reports the FT. This is despite a call for unity by House speaker John Boehner, whom the WSJ reports requesting “an army” of support. However, both Democrats and Republicans recognise similarities in their plans, according the Reuters. sides Wall Street bankers are complaining about being kept out of the loop by the Federal Reserve on contingency planning, adds the FT. FT Alphaville isn’t moaning, however, keeping up on what may happen to bonds, equities and currencies if the US is downgraded.
A deal on the debt ceiling looked further away than ever after Monday night speeches by President Barack Obama and Republican House speaker John Boehner. Mr Obama urged congressional leaders to reach a “fair compromise” over the next few days to avoid a US default, the FT reports, and warned Americans that the impasse could spark a “deep economic crisis”. In his response, Mr Boehner said Mr Obama was seeking a “blank cheque” to raise the debt limit, charging that the Democratic plan was laden with “phoney accounting and Washington gimmicks”. The LA Times says the deadline is sooner than August 2, as any legislation would need to be introduced in Congress in enough time to clear procedural deadlines. But USA Today picks up on analysis of tax receipts suggesting the government may have an extra seven to 15 days before the ceiling is well and truly reached.
President Barack Obama and John Boehner, the top Republican in the House of Representatives, are engaged in a final high-stakes push to secure an ambitious budget deal, less than two weeks before the US runs out of cash to pay its bills, the FT reports. Both the White House and Mr Boehner’s office denied they were close to an agreement, amid rising anxiety in both the Republican and Democratic camps that elements of the deal could provoke a backlash from their respective bases. The agreement under discussion involves some $3,000bn in spending cuts over 10 years, with a commitment to tax reform next year that could bring in additional revenue. But officials familiar with the talks said both sides remained apart over the issue that has long divided them – the Democrats’ insistence that any deal include extra revenues. Republicans have so far opposed any efforts to generate additional revenue by raising taxes or limiting tax deductions for wealthy Americans and some businesses.
US president Barack Obama and Republican House speaker John Boehner were on Thursday still struggling to overcome resistance from their respective parties to a debt ceiling deal, the NYT says. The latest talks, which focused on up to $3,000bn in savings from spending cuts and a tax overhaul, now faced most strident opposition from within the Democrats, the newspaper says. The FT reports one Democratic senator, Barbara Mikulski of Maryland, described the mood in the party as “volcanic” as the deal did not include higher tax revenues. However White House officials insisted the president would not agree to big spending cuts without also securing new revenue.
Another weekend of business casual negotiations in Washington failed to deliver a deal to raise the debt ceiling.
In response, President Obama held a press conference on Monday morning to urge a compromise and repeat his position on the size and shape of a deal. Read more
The White House and congressional leaders expressed confidence they could still reach a deal to raise the US borrowing limit and avert a default, the FT says, even after talks to strike an ambitious plan to cut $4,000bn from the country’s deficit broke down over disagreements on tax cuts for the wealthy. Talks on Monday will instead focus on a more limited $2,000bn savings plan after John Boehner, Republican Speaker of the House of Representatives, on Saturday rejected a large-scale deficit reduction compromise because of Democratic insistence on raising new revenues in the deal. New pressure to strike a deal could come this week from Wall Street. Moody’s Investors Service has warned it could place America’s triple-A credit rating on review for downgrade by mid-July in the absence of a deal. Treasury secretary Tim Geithner and new IMF chief Christine LaGarde both warned on Sunday of the ramifications of a US default, reports Reuters.
US president Barack Obama and John Boehner, the Republican speaker of the House of Representatives, are trying to push a more ambitious agreement to save the US government some $4,000bn over the next 10 years and take on some of Washington’s sacred cows, the FT reports. However, the big question looming in Washington is whether rank-and-file members of Congress would agree to the kind of cuts to entitlement programmes and the defence budget and the new tax revenue required to strike such a deal, with much rancour in both parties regarding any compromise — particularly within the Republican party, according to the Washington Post. Bond buyers do not appear to be expecting a complete solution, but are hardly pricing in the likelihood of default, either, says the WSJ. The talks will reconvene on Sunday.
There’s a deal, for now.
The particle accelerator will keep whizzing, kids will see pandas this weekend and Wall St can still just about function. Read more
Moving at a pace reminiscent of potentially visitor-less animals at the National Zoo, US lawmakers are still negotiating the size and shape of a budget deal before the current continuing resolution runs out at midnight on Friday:
POLITICO: President Obama is calling House Speaker John Boehner and Senate Majority Leader Harry Reid back to the White House to negotiate on the budget at 1 p.m. Just before the announcement from the White House, Reid said on the Senate floor that “the numbers are basically there” but that “the only thing holding up an agreement is ideology.” He said he was not nearly as optimistic about reaching a deal as he was last night.
Shutdown fears seemed to have shutdown on Wednesday evening when lawmakers allegedly found the contours of a deal to fund the government through the end of FY 2011.
Unsurprisingly, John Boehner on Thursday says no deal is imminent. The proposed details are still worth glancing at, however, as the rough size of any final package now seems a bit clearer. Read more
The Republican majority in the US House of Representatives on Tuesday passed a temporary budget measure that aims to cut $4bn from the US deficit over two weeks, extending a Friday deadline to March 18 for Congress to agree a budget for the rest of the year, reports the FT. The move averted the threat of an immediate budget shutdown but the new Republican speaker of the House, John Boehner, must now negotiate with Democrats over a budget deal for the 2011 fiscal year. Also on Tuesday, reports the WSJ, Fed chairman Ben Bernanke warned the Senate banking committee that Congress could create economic “chaos” if lawmakers moved to raise the short-term debt limit to fund the federal government. Bloomberg adds that the Senate’s top Democrat, majority leader Harry Reid, said his chamber would vote on Wednesday to send the stopgap bill to President Barak Obama.
The new speaker of the House of Representatives has painted a bleak picture of US life after the downturn, the FT reports. John Boehner is aiming to make cutting government programs a priority — but aides suggested that only half of a promised $100bn of cuts look achievable. Business can at least hope for a consensus between Republicans and the White House on overhauling corporate tax rates, the WSJ reports, but it also notes that healthcare spending took up a record slice of US GDP in 2009, as the economy shrank and federal Medicaid outlays rose.
Several members of the US fiscal commission are asking for a commitment from Harry Reid, the Democratic Senate majority leader, and John Boehner, the future Republican speaker of the House, to hold a vote on a final package to shrink the US budget deficit in the new Congress, reports the FT. People close to the talks said Republicans and Democrats on the panel had suggested that Erskine Bowles and Alan Simpson, co-chairs of the commission, received additional assurances from congressional leaders that they would be prepared to vote next year on a proposal that garners a majority of 14 votes out of 18 on the commission.
From the could-not-make-it-up department (well, the New York Times actually):
In the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to “blow it up” by withdrawing her party’s support for the package over what Ms. Pelosi derided as a Republican betrayal.