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On debt ceiling, no news is good news — for now

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Government funding, Build Back Better, defense reauthorization, Federal Reserve nominations — there’s a lot going on in Washington this month.

But we’ve heard very little about one of the biggest items on Congress’s year-end to-do list: the debt ceiling.

Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell have been deep in negotiations for the past couple weeks over raising the federal borrowing limit. Discussions toward an agreement have been productive, sources tell MM, but the two sides are keeping an incredibly close hold on the potential strategy.

“That’s generally a good sign — that they feel like whatever they’re talking about is making sufficient progress so as not to need to go to the floor and assail each other,” said Rohit Kumar, a former McConnell aide and the head of PricewaterhouseCoopers’ national tax practice.

One idea senior congressional leaders are considering is using the National Defense Authorization Act to address the debt ceiling, our Heather Caygle, Burgess Everett and Anthony Adragna report, citing multiple sources familiar with the discussions.

How would that work? The measure wouldn’t actually include language raising or suspending the debt limit, according to a person familiar with the matter, which is a non-starter with Republicans. But it could deal with some of the procedural hurdles to a debt limit vote.

Right now, Democrats could raise the ceiling through the reconciliation process without Republican votes, but that’s time-consuming and would force the Senate to go through two long series of votes on amendments, which Schumer is loath to do. Truncating the reconciliation process would require unanimous consent from all senators, which Democrats are unlikely to get.

Sen. Pat Toomey (R-Pa.) has previously suggested an alternative approach: Republicans could agree to take steps to help speed up the vote process in the interest of getting the deal done.

Such language, if included in the defense measure, could give both sides what they want.

GOP lawmakers want to avoid voting for a big debt limit increase and still require Democrats to vote to raise the limit to a certain dollar amount, which would give Republicans a big number they can use in campaign ads ahead of the midterm elections.

Democrats, for their part, want to be able to raise the limit high enough so that Congress won’t have to deal with the issue until well into next year, or possibly not until 2023.

The strategy is tricky: “There are only so many trains leaving the station to accomplish that goal,” the person familiar with the discussions said.

While it’s likely that a defense bill with debt-limit language could garner enough Republican support to clear the Senate, it’s less certain that such a measure could get enough GOP votes to pass the House. House Minority Leader Kevin McCarthy dismissed the idea after huddling in his office with McConnell Thursday afternoon. “I don’t think that would pass,” McCarthy said.

Before linking the debt limit to the defense bill, congressional leaders need to know with certainty how many Democrats they’re going to lose and how many Republicans they can get, the person said. If they move ahead but the bill flops, they could find themselves stuck and up against the X date.

Oh yes, the X date — When is that again? Treasury Secretary Janet Yellen has said the government can definitely keep paying the bills through Dec. 15, but it’s unclear what happens next.

The Treasury is running down its cash buffer as we speak and is set to make a large transfer to the Highway Trust Fund on the 15th. That’s also the day corporations make estimated quarterly tax payments, which could give the Treasury enough cash to push the X date to late December or even January.

The Bipartisan Policy Center, which has modeled the projected X date since the 2011 debt ceiling showdown, is set to release updated projections this morning.

IT’S FRIDAY — Happy Jobs Day to all who celebrate! And T.G.I.F. We know it’s (almost) the weekend, but let us know what we should be writing about to kick off next week: [email protected], [email protected], or on Twitter @katedavidson or @aubreeeweaver.

Labor Department releases November jobs report at 8:30 a.m. … St. Louis Fed President Jim Bullard speaks at 9:15 a.m.

CONGRESS THWARTS SHUTDOWN AFTER VACCINE MANDATE CLASH — Our Caitlin Emma, Jennifer Scholtes and Sarah Ferris: “Congress averted a government shutdown Thursday night after Senate leaders mollified a group of Republicans who demanded a vote targeting President Joe Biden’s vaccine mandate.

“The Senate passed an 11-week stopgap spending bill in a 69-28 vote, sending the measure on for Biden’s signature. The legislation, known as a continuing resolution, will keep government funding at levels set almost a year ago, when Donald Trump was president.”

BIDEN EYES BLOWOUT GROWTH EVEN AS COVID CLOUDS OUTLOOK — Our Ben White: “Republicans are portraying President Joe Biden’s Democrats as the party of ‘stagflation,’ in a bid to recall the grim era of slow economic growth and skyrocketing prices that doomed Jimmy Carter’s presidency in 1980.

“Trouble is, the ‘stag’ part of stagflation hasn’t shown up. And it may not anytime soon.”

Biden takes a victory lap: The president on Wednesday credited his administration’s actions to decongest U.S. ports and get cargo moving with preventing a crisis as supply-chain snarls threatened to leave Americans facing empty store shelves this holiday season, our Steven Overly reported.

Join Ben & Co. on Twitter today: There’s a lot more to say about growth in the time of Omicron. Tune into our colleagues on Twitter Spaces today at 3 p.m. EST for a live conversation about the supply chain, inflation, Build Back Better and more.

IN FAREWELL, QUARLES LAYS OUT ROADMAP FOR FUTURE FED WORK — Our Victoria Guida: “Federal Reserve Gov. Randal Quarles on Thursday in a farewell speech called on his successor as regulatory czar to loosen a key capital requirement without explicitly making it easier for banks to hold cash and U.S. government debt on their books.

“Quarles, whose term as vice chair for supervision ended in October, said at an American Enterprise Institute event that the Fed should set the leverage ratio for the largest, most interconnected banks based on the surcharge they face for being designated as important to the global financial system. That’s in line with a proposal released in 2018 by the Fed and the Office of the Comptroller of the Currency, which was never finalized.”

TRUMP THROWS WEIGHT BEHIND FANNIE, FREDDIE SHAREHOLDERS — Our Katy O’Donnell: “Former President Donald Trump is weighing in on shareholder claims against Fannie Mae and Freddie Mac, accusing the Federal Housing Finance Agency of “steal[ing]” people’s retirement savings, in a letter to Sen. Rand Paul (R-Ky.). Shareholders are suing for compensation after the Supreme Court this summer ruled that the FHFA’s leadership structure was unconstitutional.”

“‘The idea that the government can steal money from its citizens is socialism and is a travesty brought to you by the Obama/Biden administration,” Trump wrote in the letter to Paul Nov. 11, referring to the government’s decision in 2012 to sweep profits from Fannie and Freddie.

SEC APPROVES CRACKDOWN AIMED AT CHINESE FIRMS — The SEC on Thursday finalized rules that could halt trading in the shares of Chinese companies listed on U.S. exchanges if the firms don’t give regulators access to their audits.

YELLEN DITCHES TEAM TRANSITORY, TOO — NYT’s Alan Rappeport and Madeleine Ngo: “Treasury Secretary Janet L. Yellen on Thursday said she believed it was time to stop characterizing inflation as temporary and suggested that the Omicron variant of the coronavirus could prolong the problem of rising prices. Ms. Yellen said that over the summer it appeared that the pandemic was subsiding and that the economy would soon normalize. The spread of new variants, she said, has changed that calculus.”

FED POLICYMAKERS SHOW GREATER CONSENSUS FOR FASTER TAPER — Reuters’ Ann Saphir, Lindsay Dunsmuir and Jonnelle Marte: “Federal Reserve policymakers on Thursday sounded sanguine about the economic impact of the latest COVID-19 variant, but flagged rising inflation in remarks that suggested growing consensus for an earlier end to bond buys and, perhaps, earlier interest rate hikes next year. Atlanta Fed President Raphael Bostic told the Reuters Next conference on Thursday it would be appropriate to end the central bank’s bond-buying program by the end of March to allow the Fed to raise rates to deal with inflation.”

BIDEN AND TRUMP SEC CHIEFS TRADE TIPS ON REGULATING CRYPTO — NYT’s Ephrat Livni: “Regulators on the left and right rarely agree on policy. Yet, when it comes to cryptocurrency, two men who have led the Securities and Exchange Commission are remarkably aligned: The technology and offerings may be new, but old rules still apply. Jay Clayton, the Republican S.E.C. chair under former President Donald J. Trump, interviewed Gary Gensler, the current S.E.C. chief in the Democratic Biden administration, on Wednesday at the Digital Asset Compliance and Market Integrity Summit in New York.”

Sen. Elizabeth Warren (D-Mass.) also raised concerns over cryptomining’s “extraordinarily high energy usage, its impact on climate and rising electricity costs for consumers” in a letter to Greenidge Generation Holdings Inc., which operates one of the country’s largest Bitcoin mining facilities in Dresden, N.Y. Warren’s office flagged the letter in a press release Thursday. She asked for details from the company on its commitments to environmental protection and its emissions.

OKAMOTO TO LEAVE IMF — The International Monetary Fund said Thursday that first deputy managing director Geoffrey Okamoto, a former Trump Treasury Department official, will leave the fund early next year, and that IMF chief economist Gita Gopinath has been proposed to step into the IMF’s No. 2 role.

The move follows allegations earlier this year that IMF managing director Kristalina Georgieva pressured staff to give China favorable treatment during her time at the World Bank. The scandal spilled over to the IMF, whose board of directors issued a statement expressing confidence in Georgieva.

MARKET STRUGGLES TO REPRICE RISKS THAT CREDIT TRADERS SAW IN SEPTEMBER — Bloomberg’s Lu Wang: “The big up-and-down swings lashing equity indexes of late are being driven by stock investors rushing to adjust for risks that the corporate bond market sussed out months ago. That’s the view of Mike Lewis, head of U.S. equity cash trading at Barclays Plc, who attributes the sudden runup in share volatility to equity traders finally coming to terms with the end of free-flowing stimulus from the Federal Reserve. It’s something credit markets started to take into account in September, suggesting the process has further to run elsewhere.”

But is Wall Street’s party really ending? — AP’s Stan Choe: “The Federal Reserve’s job, its longest-serving chair once said, is to ‘take away the punch bowl just as the party gets going,’ and that’s exactly the message Wall Street took from comments by current Chair Jerome Powell this week. Stock prices tumbled after Powell said the Fed may halt its immense support for financial markets sooner than Wall Street expected. History suggests, however, that stocks aren’t always losers when the Fed pulls back its help.”



On debt ceiling, no news is good news — for now Source link On debt ceiling, no news is good news — for now

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