Wall Street
One of the factors that has been leading some to predict that the Joint Select Committee on Deficit Reduction (aka, the super committee) will come up with a deficit reduction plan of its own is the belief that Wall Street will be disappointed if that doesn't happen and that the major averages will suffer immediately and significantly.
But while there is some reason to think this could happen (after all, Bank of America Merrill Lynch predicted it several week's ago), the counter argument that Wall Street isn't really expecting much, won't be all that surprised if/when the committee fails, and that the the prediction of a massive negative market reaction is grossly overstated seems to be getting much stronger as the November 23 deadline gets every closer.
For weeks, Wall Street has been saying that it was convinced there would be a deal on the debt ceiling in Washington and wasn't at all concerned about the possibility that nothing would get done by the August 2 deadline. There would be a deal, it said, because in the end there's always a deal and everything that we were seeing inside the beltway was nothing more than political theater. As a result, the common assumption was that the prospect for a deal was already priced in to the markets.
Except that we now know for sure that it wasn't.
My column from this morning's Roll Call is about Wall Street's clearly changing opinion about the federal deficit and national debt. I wonder why CNBC hasn't discussed this yet.
Bond Vigilantes Are Now Deficit Cheerleaders
Aug. 3, 2010
The story is that the bond market forced President Bill Clinton to change his budget plans. Bob Rubin, director of the newly created National Economic Council, supposedly convinced Clinton that those who buy and sell Treasury securities on Wall Street would force interest rates much higher and hurt the economy if he didn’t do something about the deficit and federal borrowing.
Zachary Goldfarb reports in today's Washington Post about the SEC's efforts to reform its enforcement image. There are plenty of examples given that illustrate how far the SEC has to go, and I am not going to argue that enforcement shouldn't be better and that securities fraud is okay.
But lax enforcement was not the SEC's main contribution to the financial crisis. The place where the SEC screwed up, and the revelation that should have shaken things up 18 months ago, was this event, reported by Stephen Labaton in The New York Times:
Last Thursday and Friday were the inspiration for my colunm in today's Roll Call.
Like Wall Street, Budget Policymakers Need Certainty
Nov. 3, 2009
By Stan Collender
Roll Call Contributing Writer
Wall Street, which supposedly hates uncertainty, was clearly unhappy late last week.
On Thursday, in the face of a report showing not just that the economy had stopped declining but that it had actually grown faster than expected in the third quarter, the Dow Jones industrial average rallied by almost 200 points. Then, after a separate report on Friday showed that consumer spending had fallen by an unexpectedly large amount in that same quarter, the market sold off by more than the previous day’s gain as the Dow fell by about 250 points.
