Photo: Screenshot, Inside Job
Robert Kuttner, the founder of the magazine American Prospect, suspects that Wall Street was behind the President’s decision not to use the 14th Amendment to raise the debt ceiling.Many have said that it would have been entirely legal for Obama to use the 14th amendment, and they recommended that he do so. But Obama’s advisers recommended that it did not apply in this case and before the issue was resolved, at a Town Hall meeting, he said “[I] talked to my lawyers” and “they are not persuaded that that is a winning argument.”
Kuttner believes that Wall Street had a hand in the decision.
The main reason Obama rejected taking the 14th was that his Wall Street cronies, from Chief of Staff Bill Daley and Treasury Secretary Tim Geithner on down, were told by the financial industry that recourse to the 14th Amendment would spook financial markets.
Presumably, use of the 14th Amendment would have produced lawsuits. And the lawsuits might have caused some investors to shun some Treasury securities, or money market funds filled with Treasury securities. And the bond rating agencies might have reacted badly.
This projection of worst-case outcomes, of course is all speculation–Wall Street’s stock on trade. But look what happened when the deal finally passed. The stock market tanked!
That’s because the real economy is going to hell in a hand-basket…
Wall Street has had far too much influence in this debate, pushing for debt reduction rather than economic prosperity, colouring the White House view. But now those chickens are coming home to roost, too.
It’s speculation of course, but he makes an interesting point about how the markets might have reacted to a 14th amendment resolution vs reaching an agreement with Republicans.