Washington DC: Federal Reserve Bank of Richmond President Jeffrey Lacker warns on debt ceiling

· Washington – the F11 budget passes through the House late in NY trading on Thurs (this was expected for the most part although there was some doubt about whether the votes would show up, esp. after the recent CBO report; note that 59 Republicans wound up voting against the plan and Boehner relied on Dems to cross the finish line….this means House Dems could have a lot more power in the debt ceiling debate than previously thought).  However, the debt ceiling debate increasingly is becoming the single focus for investors…the Obama speech Wed was significant only in that it highlighted the massive gulf btw Ryan/GOP and Obama on budget…..the risk is that both sides hold the debt ceiling hostage while they fight over long-term spending (the WSJ notes how at least in public the two sides don't appear to be close to any sort of a deal http://on.wsj.com/h6h6rl).  Note that May 16 is when the Treasury first starts touching the ceiling and Jul 8 is the absolute last date.  The one bright spot is that sentiment on this issue is now VERY negative…keep in mind that while the F11 budget talks were a negative (they came right down to the wire), the Nov tax deal was a positive surprise (showing that Washington can wind up pleasing the markets, esp when expectations are as low as they are now). 

· Politico speaks w/a financial exec who has been unofficially doing the rounds on Capital Hill to guage the attitudes towards the debt ceiling.  The financial execs has found that "fiscally conservative members realize that you must raise the debt limit, if not would be like crossing the streams in Ghostbusters. Those just learning about the issue, like President Obama, are reversing previously held assumptions and now agree as well. And while the Tea Party wants to think that voting no is an option, one only needs to check the price of Greek two-year debt, approximately18 percent, and say 'no dice.'"   Politico

· White House officials are seeking to reassure int'l investors over debt – Geithner, Lew, and others, have been making comments to the market expressing confidence that Congress would be able to take action on the debt ceiling.  FT

· Lacker warns on debt ceiling - Federal Reserve Bank of Richmond President Jeffrey Lacker Thursday said debt ceiling "brinkmanship" is bad for the economy and urged a timely resolution of the matter.  DJ