The US government just took the first major step to signal its concerns over the congressional standoff over the nation’s debt limit.
On Thursday, the Treasury Department announced that it was suspending the monthly auction of two-year notes scheduled for October 27.
“Due to debt ceiling constraints, there is a risk that Treasury would not be able to settle the 2-year note on Monday, November 2, 2015,” the Treasury said in a statement.
The Treasury Department schedules regular auctions for securities to investors, governments, large banks, brokers, and others, borrowing to finance the running of the government. Lenders of short-term debt — like two-year notes — would be most affected if Treasury is unable to repay.
Treasury Secretary Jack Lew has said Congress will need to raise the nation’s debt limit by November 3 to stave off a potential first-ever default.
But with just two weeks ahead of that deadline, there seems to be no clear plan to avert such a potential catastrophe. The House Republican conference has found itself in turmoil over the past month with the resignation of House Speaker John Boehner (R-Ohio).
The expected rise of Rep. Paul Ryan (R-Wisconsin) to the speaker post next week will help smooth out tensions in the conference. But he would face staunch resistance from conservative members at trying to pass a so-called “clean” debt-ceiling.
But House Republicans also have a maths problem: The last time a clean debt-ceiling lift passed, in 2014, it did so with only the support of 28 House Republicans. Now, fewer House Democrats are in Congress — only 188 — and some of the House Republicans who voted in favour of an increase last time are no longer in office. So it remains unclear whether Republicans could get the 30 votes necessary to pass a clean hike.
“Nobody knows what’s going to happen,” one GOP aide told Business Insider this week.
Treasury planned to carry on with the five- and seven-year auctions scheduled during the same week, and said postponing the two-year auction would be less of a risk to the market functioning smoothly.
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