House GOP Abandons Proposal, Fitch Warns of Downgrade

House GOP Abandons Its Proposal, Fitch warns of downgrade.

Yesterday I wrote about how Senate leaders were near to a deal that would end the stalemate in Washington, but the Tea Party was unlikely to support the bill. Late last night, a similar GOP backed proposal fell through in the house and Speaker Boehner had to cancel plans to bring the bill to the floor. The latest setback comes two days before the treasury says it will not be able to borrow any more money to cover the nation’s expenses. Once the nation cannot borrow any additional money starting on Thursday October 17th, the $30B left on hand will cover the U.S. for a little over a week leading to a default shortly thereafter.

With the failure of the House bill, there is some hope for a similar bill being worked on in the Senate that would need to be passed before Thursday’s deadline. The success of this bill is dependent on every senator agreeing since they would have to unanimously agree to expedited approval procedures. The bills would extend the nation’s borrowing capabilities and fund government for a short time giving congress an opportunity to develop a long term solution. The proposals would likely pass, if not for Tea Party Republicans who are still pressing to cut the Affordable Care Act and want drastic measures to reduce the deficit.

Yesterday afternoon, Fitch Ratings warned it could downgrade the nation’s top credit rating in the wake of a continued debate in Washington. This reflects the growing tension on Wall Street over the possibility of a default. As a result, the Dow fell .87% and traders stated they’re, “being held hostage by the headlines.”