Can Wall Street Stop the Shutdown?
If House Speaker John Boehner can't get his troops to pass a spending bill acceptable to the Senate, it's time for the grownups to take charge.
So who might be able to pull off such an intervention? I can think of three groups that should try, starting with the Wall Street brass meeting with President Barack Obama at the White House tomorrow. They've been unusually timid, beyond issuing anodyne statements that a government shutdown would be a bad idea.
These aren't exactly Obama's buddies. Jamie Dimon, the chairman and chief executive officer of JPMorgan Chase & Co., for example, is deep into negotiations with the Justice Department over whether his bank will admit to wrongdoing when it securitized mortgages. Goldman Sachs Group Inc.'s Lloyd Blankfein, Citigroup Inc.’s Michael Corbat, Deutsche Bank AG’s Anshu Jain and Bank of America Corp.’s Brian Moynihan are among the other major players expected at the White House.
That's a lot of firepower -- and so far it's gone unused in the fiscal drama. Speaking through the Financial Services Forum, a lobbying group, the bankers last week added their names to a letter from the U.S. Chamber of Commerce and 250 other business groups urging Congress to act. As pressure tactics go, a mass letter is pretty pathetic.
The CEOs should be standing eyeball-to-eyeball with lawmakers, and, while poking a finger at their chests, reciting something like this: You claim to be pro-business and pro-growth, but a partial government shutdown will cost the U.S. at least $300 million a day in lost economic output. Estimated fourth-quarter growth of 2.2 percent will be reduced by 0.2 percentage point -- if the shutdown lasts a week. A 21-day closing like the one in 1995-96 could cut growth as much as 1.4 percentage points.
Then the CEOs should make this point: Slower growth means less business borrowing and investment, which results in less job creation. When that happens, business confidence dries up, consumers spend less, markets go berserk and the weak recovery gets even more anemic.
And then the clincher: If you can't fix this mess, then I can't, in good conscience, support your re-election or contribute to your campaign fund. And I will tell everyone I know to avoid doing so as well.
Of course, Wall Street CEOs teaming up with the Chamber of Commerce to lobby the House could be wasted on the 50 or so arch-conservative Republicans reveling in their shutdown antics. But it wouldn't be lost on an equal number of less conservative Republicans -- just don't call them moderates, a dirty word that invites a primary challenger -- who are starting to find their voices.
This second group includes Representative Devin Nunes of California, who thinks it's moronic to shut down the government over Obamacare and likened the bloc of Republicans who favor the tactic to "lemmings with suicide vests." Also in this group are Representatives Peter King and Michael Grimm of New York, Charlie Dent of Pennsylvania and a few dozen others, mostly from Northeastern and West Coast swing districts.
During the January fiscal-cliff negotiations, a less-ideological bloc of 85 Republicans joined with 172 Democrats to end the stalemate by raising taxes on those earning more than $450,000, while preserving the Bush tax cuts for everyone else. A similar middle-of-the-road coalition got Hurricane Sandy funding passed in the House. These are the Republicans the CEOs should pressure.
A third group of potential intervenors consists of Republican governors. Some of them, including Chris Christie of New Jersey and Rick Snyder of Michigan, have already warned that a shutdown would be an economic setback for them, just as they are seeing signs of recovery.
Even Bob McDonnell of Virginia, who no one could accuse of being wet, said yesterday that "You don't shut down government and have the people that depend on government suffer, because that's really what will happen." He added: "My Republican friends have got to understand there's no way on earth that the president and the U.S. Senate are going to vote to defund Obamacare. It's absolutely wrong to shut down the government over this issue."
The Tea Party-backed representatives in the House have gotten all the attention in this fiscal showdown. It's time for CEOs, governors and responsible House Republicans to step in.
(Paula Dwyer is a member of the Bloomberg View editorial board. Follow her on Twitter.)