John Boehner’s sudden resignation is causing heartburn on Wall Street.
The House Speaker’s bombshell announcement Friday that he would leave Congress and his powerful leadership post at the end of October shocked his colleagues on Capitol Hill. Republicans now face the unexpected task of choosing their next leader, which could intensify the party’s divisions.
And on Wall Street, that means one thing: anxiety.
The financial sector hates uncertainty and Boehner’s resignation comes amid unfinished business with several crucial fiscal deadlines looming on Capitol Hill. Congress must pass a government funding bill by next week and address the debt ceiling later this year.
Wall Street analysts expressed concern Friday that Boehner’s retirement will give rise to the conservative factions in Congress and boost the chances that Washington threatens to miss these critical deadlines.
John Canally, an economist at LPL Financial, told CNN while he is still betting against the government shutting down in a few weeks, Boehner’s announcement nevertheless “raises the odds.”
“Either way, markets will not like the uncertainty around the debt ceiling, although we think that Congress — whoever the House leader is — will get it done,” Canally added. “The market has seen the movie before, and knows and expects that Congress will wait until the last minute and then fix it.”
The most urgent deadline confronting Congress comes next week on Oct. 1, before Boehner is set to resign. The House and Senate must pass a bill to keep government agencies open. That debate is embroiled in a divisive political controversy over the funding of Planned Parenthood.
While Boehner could broker a solution to the spending fight before he leaves, it’s possible his successor as Speaker will have to find a more permanent solution. The top contender to be the next Speaker is his top deputy, House Majority Leader Kevin McCarthy, although more conservative alternatives who would be less concerned by a government shutdown have already signaled a willingness to challenge him.
Later this year, after Boehner leaves, Washington must address one more issue that comes with a ticking time bomb: raising the government’s borrowing limit.
Also known as the “debt ceiling,” this refers to a limit on how much debt the federal government can carry. Raising that threshold is critical for allowing the Treasury Department to pay the government’s bills, but in recent years, it has also become a political flashpoint in Congress.
In the fall of 2013, Congress played chicken with the deadline, only raising the debt ceiling at the last minute and creating anxiety in the markets.
“The Conservative House Republicans have been arguing since the 2011 debt crisis that Speaker Boehner is not conservative enough,” Robbert van Batenburg, an analyst with the financial services firm Societe Generale, wrote in a research note Friday. “Without Boehner, an agreement on the debt ceiling and federal funding will become more challenging.”