Wall Street reacts to House vote on debt ceiling: Refusal to raise debt limit won't affect market
BY Alison GendarDaily News
June 1, 2011
WASHINGTON — Wall Street recognizes Tuesday night's vote on the debt ceiling as nothing but a kabuki dance that likely won't send the stock market into a tizzy, analysts said.
A majority of House Republicans, and most Democrats, refused to raise the debt limit on a 318-97 vote.
"The markets may shrug it off, since it is still considered a political drama at this point," said Asha Bangalore, senior vice president at Northern Trust Corp.
Since the Obama administration has moved money around to push off the debt deadline until Aug. 2, Wall Street won't panic - yet.
"They are not being very responsible, but it is understood at this point of time it is still May and that they are playing," Bangalore said.
Stan Collender, a federal budget expert with Qorvis Communications, said the term "kabuki" gave the political theater too much dignity.
Even so, he didn't expect a sharp drop in the markets.
"I think it's unlikely, but I wouldn't be the first to underestimate the market's suseptibility to this kind of move," he said.
GOP leaders have reached out privately to the movers-and-shakers in the financial sector to let them in on the script, and scheduled the vote for after the close of the U.S. markets, all of which has also worked to quiet jitters.
"Tonight's vote is definitely symbolic," said Rep. Peter King (R-L.I.)
King said he expected near unanimous opposition from Republicans who are demanding any increase be coupled with substantial budget cuts.
A final agreement to raise the $14.3 trillion borrowing ceiling will likely not happen until the last possible minute, he added.
A White House spokesman made nice by refusing to characterize the GOP-pushed vote as political theater.
"It's fine," smiled White House spokesman Jay Carney. "It's fine."
Rep. Anthony Weiner (D-Queens) called such GOP brinkmanship reckless.
"Republicans are playing with fire by voting against an extension of the debt limit today. I hope that the markets understand a political stunt when they see one," Weiner said.
"Because, to much of the world, putting the full faith and credit of our nation at risk understandably seems like playing Russian roulette," he added.
Voting to raise the debt ceiling, though, is never a popular move.
More Americans are afraid of more federal debt - resulting in more spending - than scared of the economic fallout of not raising the ceiling, according to a recent Pew Research Center poll.