How Debt Ceiling Talks Play Out On Wall Street

Originally published on July 29, 2011 1:54 pm
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STEVEN INSKEEP, Host:

It's MORNING EDITION, from NPR News. I'm Steve Inskeep.

MARY LOUISE KELLY, Host:

Good morning, David.

DAVID WESSEL: Good morning.

LOUISE KELLY: So let me start there. How are the markets looking this morning?

WESSEL: Where we see the trouble is in all these really arcane money markets, where - which depend on the U.S. Treasuries, and they're definitely showing some signs of strain. Billions of dollars are leaving money market funds, for instance, because people are afraid of what'll happen.

LOUISE KELLY: OK. I mean, I wonder - you said if it's going to take a crash to get Washington to do something. Is this a case where you've got, you know, Washington watching Wall Street to see how bad things might get, you know, whether failure to reach a deal might really send the U.S. economy off a cliff, as everyone fears? At the same time, Wall Street watching Washington to see just how bad things might get here.

WESSEL: Yes. I think that's a pretty good description of what's going on. It looks like Wall Street, for some time, if at all, they'll work it out. There just is a lot of theater, and they'll come to a conclusion at the end. I think you're beginning to see, in the last couple of days, some second thoughts on Wall Street and saying, oh, my gosh. Is the unthinkable now thinkable? Are these guys nuts enough to drive the car off the cliff?

LOUISE KELLY: David, where are we in terms of the U.S. credit rating and whether it may be downgraded amidst all this?

WESSEL: I think it's highly likely that at least one of the rating agencies, Standard & Poor's, will downgrade the U.S. from its triple-A status to double-A status.

LOUISE KELLY: Even if a deal is reached on the debt.

WESSEL: Correct. So that would put us in the company of Slovenia. What Standard & Poor's have said is they're worried not only about the debt ceiling and default, which would be a real problem, but they're also worried about the inability of the political system to deal with a long-run deficit issue.

INSKEEP: I personally don't think that's such a big deal. I think the problem is the problem. The credit rating isn't the problem. But some people disagree.

LOUISE KELLY: One other thing to ask you about, which is there was some talk earlier in the week about whether the August 2nd deadline was as firm as the White House and some others have said it is. Is there any wiggle room there in terms of when the U.S. might run out of money to pay its bills?

WESSEL: So they have a lot of control, here, and no one knows what they're going to do. And they're being very coy. They're not saying what they're going to do.

LOUISE KELLY: And I guess the big question is, you know, as we head into the weekend, trying - I'm sure there will be tremendous pressure - there already is, of course - but tremendous pressure to try to come up with some sort of deal before markets start opening Monday morning.

WESSEL: Yeah. So our - what we usually say before Asia opens Sunday night. I think that that's what the president was saying in his press conference, where he sort of abandoned the partisan rhetoric of earlier in the week and kind of pleading with people to act like grown-ups. And there is some sign that some of the - some people on the Hill are beginning to look at it the same way.

LOUISE KELLY: All right. Thanks very much, David.

WESSEL: You're welcome.

LOUISE KELLY: That's the Wall Street Journal's David Wessel. Transcript provided by NPR, Copyright NPR.