Because through back channels the administration is going out of their way to assure banks that a default just isn’t happening. From Charles Gasparino at Fox Business:
While officials from the Obama Administration raised their rhetoric over the weekend about the possibility of a debt default if the debt ceiling isn’t raised, they privately have been telling top executives at major U.S. banks that such an event won’t happen, FOX Business has learned.
In a series of phone calls, administration officials have told bankers that the administration will not allow a default to happen even if the debt cap isn’t raised by the August 2 date Treasury Secretary Tim Geithner says the government will run out of money to pay all its bills, including obligations to bond holders. Geithner made the rounds on the Sunday talk shows saying a default is imminent if the debt ceiling isn’t raised, and President Obama issued a similar warning during a Friday press conference after budget negotiations with House Republicans broke down.
A senior banking official told FOX Business that administration officials have provided guidance to them that even though a default is off the table, a downgrade “is a real possibility for no other reason than S&P and Moody’s have to cover (themselves) since they’ve been speaking out on the debt cap so much.”
This guidance is a big reason why Wall Street has largely dismissed the possibility of default, and though the markets have been jittery amid the talk of default, they haven’t imploded as would be the case, many economists fear, if the nation missed a payment on its debt.
The banking official said the administration understands that if there were to be a default, it would likely spark another financial crisis.
“They also know they can pay the debt with cash on hand,” this official told FOX Business. The Treasury collects around $2 trillion in tax revenues, and is scheduled to pay out $200 billion in interest to bond holders. In order to meet its obligations to contractors, social security recipients and others, the administration would have to raise another $1 trillion either through cuts, higher tax revenues, the issuance of debt or a combination of all three.
So if this is the case, how much credibility can be put into the Treasury Secretary’s words? And what of the President himself? Are we to assume it’s merely a white lie, to help move the debt ceiling negotiations along at the pace he prefers? Or as some have suggested it is part of a much larger, more cynical plan to pin the blame for the bad economy on the GOP; that next year he’ll counter assertions that he has been a poor steward of the economy by counter-asserting that everything was fine until the Wingnut Tea-Baggerz wrecked it with their irresponsible demands during the debt ceiling increase debate.
What this does seem to indicate is that there is more breathing room for negotiations that Mr. Obama or the Democrats want to admit, and that they’re more than willing to frighten the public in order to advance their political agenda. Which, if you recall, was one of Obama’s major, damning, criticisms of the GOP during the campaign of 2008; their willingness to engage in fear-mongering to divide the American people. Not to mention their most recent mediscare demagoguery…
But is any of this really shocking, coming from the crew that subscribes to the maxim, “BY ANY MEANS NECESSARY!”
What do you think, kind reader?