OVERNIGHT MONEY: Lew in the spotlight

THURSDAY’S BIG STORY:

Break out the coffee and bagels: It’s gonna be an early one on Thursday. 

With a little ol’ thing called the debt limit looming large over the horizon, Treasury Secretary Jack Lew will head to Capitol Hill to try, yet again, to convince Congress to do something to avoid the very bad consequences that could come from not increasing the nation’s borrowing authority to pay billions of dollars in bills coming due. 

Lew is slated to appear at an early morning hearing before the Senate Finance Committee to discuss the implications of the $16.7 trillion borrowing cap, and what exactly might happen if Congress decides not to raise it.

Lew has regularly warned Congress about the need for a borrowing boost, and has said that Oct. 17 would mark the date the government would be left with just $30 billion in cash to keep paying its bills. 

{mosads}However, Republicans are continuing to air skepticism about that timeframe, with many believing that either the “real” deadline is later or that the threats of economic catastrophe from the Obama administration (and many on Wall Street and in the business community) are overblown.

Senate Republicans blasted President Obama on Wednesday for making “unproductive and misguided” warnings about a default on the nation’s debt. 

Meanwhile, a major credit rater expects the Treasury Department would avoid default if the $16.7 trillion debt limit were not raised.

In a document dated Oct. 7, Moody’s Investors Service said it believes that if the borrowing cap were not increased, the government would prioritize interest and principal payments on its outstanding debt above other government bills, even though the Treasury Department has repeatedly called prioritization plans unworkable.

Tomorrow’s testimony will mark a last gasp of sorts for Lew to underline how severe a debt limit standoff could be, and convince skeptical lawmakers that, yes, the nation really does need to borrow more money.

Shortly after that, the Senate Banking Committee will jump into the default debate, hearing from the heads of several major banking and financial organizations about what a debt-limit fight and potential default would mean for them. 

Spoiler alert: Not pretty. 

Industry leaders will warn that even the hint of a default could lead to spiking mortgage rates, chaos in financial markets and a whole host of other economic havoc that would be felt from Wall Street to Main Street for years to come. 

So expect whatever is the exact opposite of rosy talk and optimistic outlooks in this pair of hearings. 

WHAT ELSE WE’RE WATCHING

A trip down Pennsylvania Ave.: A group of House Republicans is headed to the White House on Thursday to meet with President Obama about the stalemate over reopening the government and raising the debt limit.

Not long after invitations were sent and the meeting set, White House press secretary Jay Carney on Wednesday said that the president was “disappointed” that Speaker John Boehner (R-Ohio) wouldn’t be bringing his full complement of Republican members. 

“The president thought it was important to talk directly with the members who forced this economic crisis on the country about how the shutdown and a failure to pay the country’s bills could devastate the economy,” Carney said in a statement. 

Instead, Boehner is sending 18 Republican lawmakers, including a handful of committee chairmen. 

A group of Senate Dems, including Senate Majority Leader Harry Reid (D-Nev.) is set to head to the White House tomorrow as well. 

Meanwhile, House Budget Committee Chairman Paul Ryan (R-Wis.), who will attend tomorrow’s meeting, has made a proposal to end the shutdown and raise the debt ceiling that was similar to an op-ed he wrote for Wednesday’s Wall Street Journal.

Ryan made no mention of delaying or defunding President Obama’s healthcare law in that article. 

The plan called for “modest” structural changes to Medicare and Social Security to resolve the fiscal crisis. 

Heritage Action CEO Michael Needham said the group would only support a plan to reopen the government if it also defunds ObamaCare, pushing back against Ryan’s idea. 

Ryan said during the day that he is not giving up on halting ObamaCare — he just wants to add other reforms to the list in budget negotiations with Democrats and the president. 

Other talks also took place on Capitol Hill. 

Boehner met privately with House Minority Leader Nancy Pelosi (D-Calif.) and House Minority Whip Steny Hoyer (D-Md.) in his Capitol office suite on Wednesday.

As the standoff continues, other plans started to make the rounds. 

But it clearly wasn’t enough for business group or the public, who urged Congress to take action. 

The National Retail Federation (NRF) joined the chorus of business interests calling for lawmakers and the Obama administration to end the stalemate and pass a funding bill to reopen the government and hike the debt ceiling.



“We strongly support passage of both a continuing resolution to provide for funding of the federal government into the next fiscal year and a measure to raise the nation’s debt ceiling,” Matthew Shay, the NRF’s president and CEO, said in the letter to congressional leaders.

Amid the gridlock, only 28 percent have a favorable view of the GOP, the worst rating Gallup has ever registered for a political party. 

It’s also a 10 percent plunge from Gallup’s last poll in September, when 38 percent had a favorable view of Republicans. 

BREAKING NEWS

Yellen gets the nod: After months of speculation, President Obama nominated Janet Yellen to be chairwoman of the Federal Reserve on Wednesday.  

The president called her a “proven leader” who is “tough” and has “a keen understanding of how markets and economies work.”

Meanwhile, her nomination was just what the stock markets needed as the lack of progress on a government shutdown and debt-ceiling increase make their mark on confidence.

The reaction to Obama’s pick — urged by many Senate Democrats — was largely given the thumbs up from a broad swath of central bank watchers on Wednesday and kept the Dow Jones industrial average in positive territory. 

ECONOMIC INDICATORS

Initial Claims: Despite the government shutdown, the Labor Department is still expected to release its weekly filings for jobless benefits. The report was not included on a list of delayed economic reports. 

Treasury Budget: The Treasury Department releases its September budget data, which is used mostly by the market for year-over-year changes in receipts and outlays. 

WHAT YOU MIGHT HAVE MISSED

— GOP Sen. Corker skeptical of Yellen nomination

— IRS official: No ObamaCare problems

— Koch Industries to senators: We haven’t lobbied to ‘defund ObamaCare’

— House votes 425-0 to restore death benefits for fallen soldiers

— Rep. Braley complains about shutdown’s impact on House gym’s towel service

— GOP to hold hearing on closed parks

— Regulators urge banks to go easy on those hit by shutdown

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