July 23, 2014
US Congress approves debt limit extension
The US Congress has approved legislation to increase the country's debt limit for a year, bowing to President Barack Obama's demands for a debt limit increase without any conditions after a dramatic Senate vote.
Final action in the Senate came only after an hourlong nail-biting procedural tally forced by the objections of Republican Ted Cruz, a conservative Tea Party favorite, in which it appeared at first there would not be enough Republicans to join the Democratic majority and advance the bill.
A decision by Senate Republican Leader Mitch McConnell and Senate Republican Whip John Cornyn, who are both up for re-election this year, to vote to advance the measure appeared to kick the procedural tally over the needed 60 votes.
After a few more tense minutes of huddling on the Senate floor, several other Republicans changed their votes to follow their leadership. In the end, 12 Republicans joined Democrats in helping the bill across the procedural hurdle on a vote of 67-31.
The measure, which then passed the Senate on a final, party-line vote of 55-43, now goes to Obama to be signed into law.
The House of Representatives, where Republicans hold a majority, passed the measure in a close vote a day earlier, after Republicans dropped the confrontational tactics they had used in similar votes over the past three years.
The advance of the measure this week has brought relief to financial markets. Investors were becoming increasingly jittery ahead of Feb. 27, when the Treasury expects to exhaust existing borrowing capacity, putting federal payments at risk.
Without an increase in the statutory debt limit, the government would soon default on some of its obligations and have to shut down some programs, a historic move that would have likely caused severe market turmoil.
Reaction in most financial markets to the drama on the Senate floor was muted, with US stocks holding near the unchanged mark on the day and most Treasury debt prices remaining modestly lower for the session.
But there was visible relief in the short-term interest rate market. The rate on the one-month Treasury Bill, which had jumped in the past week on concern over a protracted showdown over raising the debt ceiling, dropped to its lowest in three weeks, ending the day at just 0.01 percent.