The President's Obligation to Take Care That the Laws Be Faithfully Executed Requires Him to Start Minting Large-Denomination Platinum Coins
President Obama Doesn't Understand the Origins of the Deficit

If Only Karl Marx and Friedrich Engels Had Been Right...

… and the state were a committee for managing the affairs of the bourgeoisie

Well, the big bourgeoisie--the bankers--are really annoyed at Boehner. Interestingly, they are not so annoyed at Obama: they understand that he has not created this mess.

With any luck they will draw the lesson that, as Clive Crook put it in one of his few moments of courage, "the Republican Party… deserve[s] political annihilation" for this clown show, and shift their political weight over to supporting the Rubin wing of the Democratic Party.

Tom Braithwaite, Michael Mackenzie, and Robin Harding:

Bank chiefs send US debt default warning: Wall Street’s leading chief executives intervened in the US debt debate on Thursday, writing to President Barack Obama and Congress to warn of “very grave” consequences of a default and urging them to cut a deal “this week”.

Lloyd Blankfein of Goldman Sachs and Jamie Dimon of JPMorgan Chase were among 14 chief executives of banks and insurers who signed the letter, along with Rob Nichols, the head of the Financial Services Forum, the umbrella association for the biggest financial groups in the US.

The letter said a default, which is still perceived as unlikely, or a downgrade from a triple-A credit rating, which analysts believe is increasingly likely, “would be a tremendous blow to business and investor confidence – raising interest rates for everyone who borrows, undermining the value of the dollar, and roiling stock and bond markets”….

The Treasury has so far refused to make public any contingency plans for the event that there is no rise in the debt ceiling. Unless the Treasury says, for example, whether it would prioritise interest payments, then it is hard for the Fed to discuss the implications with banks…. Banks are concerned about a wide range of operational issues as well as the broader question of how the Fed would support the financial system if there were disruption caused by a failure to raise the debt ceiling. For example, they would like to know whether the Fed would be willing to lend against Treasuries with a defaulted interest payment, which would support the repo market. At a broader level, they would like to know whether the Fed will support the refinancing of Treasury securities by stepping in and buying any unsold stock at auctions…. [B]anks want to know what support the Fed would offer if there were a run on money market funds…. They also want to know how the Fed would handle their capital and liquidity regulation if, for example, Treasuries fell in value or they experienced large inflows or outflows of deposits and how principal and interest payments would be made.

The obvious answer is that the Fed would buy enough Treasuries at a high enough price to keep September 2008 from coming again, but not so much to keep interest rates from spiking and panicking congress into passing a debt ceiling increase. But the obvious answer, earlier, was that the Fed would engage in quantitative easing until nominal GDP was on track to return to it pre-recession trend, and the Fed did not do that.