Earlier we mentioned how GOP Majority Leader Eric Cantor came out against state bankruptcies, which is Newt Gingrich’s pet idea.James Pethokoukis at Reuters thinks that Wall Street got to the GOP on this one.
It makes sense. Wall Street muni dealers hate the idea of doing anything that could cause a cascading failure of this market. He also notes that Wall Street firms make a lot of money running state pension funds, so there’s little desire to see a restructuring of obligations on that end.
In the end, we’ll probably see more examples of Wall Street pushing for ideas that are anti-austerity. Do you really think banks, with their massive holdings of Treasuries, want the GOP to do anything that would make markets nervous of a US default? Ha!