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| US shutdown talks: White House and Republicans fail to agree deal | |
| (about 9 hours later) | |
| White House talks with Republicans failed to reach an agreement to end the budget crisis on Thursday evening despite earlier hopes that a deal might be in sight. | White House talks with Republicans failed to reach an agreement to end the budget crisis on Thursday evening despite earlier hopes that a deal might be in sight. |
| Discussions between Barack Obama and House speaker John Boehner broke up after 90 minutes with little apparent progress, although there was a marked change in tone on both sides that suggests a deal could still be close. | Discussions between Barack Obama and House speaker John Boehner broke up after 90 minutes with little apparent progress, although there was a marked change in tone on both sides that suggests a deal could still be close. |
| Earlier, Boehner sent stock markets soaring by offering to pass a temporary extension to the US debt limit, potentially ending a standoff that could lead to a default when the current limit is reached on 17 October. | Earlier, Boehner sent stock markets soaring by offering to pass a temporary extension to the US debt limit, potentially ending a standoff that could lead to a default when the current limit is reached on 17 October. |
| But the Republicans refused to lift a separate threat to spending authorisation, which has led to a partial shutdown of the government since 1 October. | But the Republicans refused to lift a separate threat to spending authorisation, which has led to a partial shutdown of the government since 1 October. |
| Obama had insisted on at least a temporary reprieve from both threats before he would agree to negotiate over Republican demands to repeal his healthcare reforms and cut spending. | Obama had insisted on at least a temporary reprieve from both threats before he would agree to negotiate over Republican demands to repeal his healthcare reforms and cut spending. |
| On Thursday night, it appeared the president had chosen to stand his ground and may have initially refused to accept the partial climbdown from Boehner. | On Thursday night, it appeared the president had chosen to stand his ground and may have initially refused to accept the partial climbdown from Boehner. |
| In a statement, the White House said: "After a discussion about potential paths forward, no specific determination was made. | In a statement, the White House said: "After a discussion about potential paths forward, no specific determination was made. |
| "The president's goal remains to ensure we pay the bills we've incurred, reopen the government and get back to the business of growing the economy, creating jobs and strengthening the middle class." | "The president's goal remains to ensure we pay the bills we've incurred, reopen the government and get back to the business of growing the economy, creating jobs and strengthening the middle class." |
| Some initial reports claimed the president had rejected Boehner's debt ceiling offer outright, but the White House statement left open the possibility that a deal was near. | Some initial reports claimed the president had rejected Boehner's debt ceiling offer outright, but the White House statement left open the possibility that a deal was near. |
| "The president had a good meeting with members of the House Republican leadership this evening," added the statement. | "The president had a good meeting with members of the House Republican leadership this evening," added the statement. |
| "The president looks forward to making continued progress with members on both sides of the aisle." | "The president looks forward to making continued progress with members on both sides of the aisle." |
| Republican leaders told CNN they had "a good honest discussion" that did not lead to a "yes or no" from the president. | Republican leaders told CNN they had "a good honest discussion" that did not lead to a "yes or no" from the president. |
| Nevertheless Senate Democrats were sceptical about accepting the Republican offer of talks until the threat of continuing government shutdown was also removed. | Nevertheless Senate Democrats were sceptical about accepting the Republican offer of talks until the threat of continuing government shutdown was also removed. |
| "Not going to happen," declared majority leader Harry Reid, standing outside the White House after he and fellow Democrats met with Obama before the Republican meeting. | "Not going to happen," declared majority leader Harry Reid, standing outside the White House after he and fellow Democrats met with Obama before the Republican meeting. |
| Earlier White House officials had given a cautious welcome to the Republican offer, but stressed they would need to see the exact wording before deciding if it was enough to proceed with formal talks. | Earlier White House officials had given a cautious welcome to the Republican offer, but stressed they would need to see the exact wording before deciding if it was enough to proceed with formal talks. |
| The president is "happy that cooler heads seem to be prevailing," said spokesman Jay Carney, adding: "We would prefer to see a longer term resolution." | The president is "happy that cooler heads seem to be prevailing," said spokesman Jay Carney, adding: "We would prefer to see a longer term resolution." |
| Republicans have been under intense pressure from business leaders and party donors to avoid a possible US default by removing the debt ceiling threat from their arsenal. | Republicans have been under intense pressure from business leaders and party donors to avoid a possible US default by removing the debt ceiling threat from their arsenal. |
| But there is no guarantee that the more conservative Republicans in Boehner's caucus will support it. | But there is no guarantee that the more conservative Republicans in Boehner's caucus will support it. |
| US stock markets soared on the initial Republican debt ceiling offer. The Dow Jones Industrial Average had risen over 230 points (1.56%) shortly after Boehner's Thursday morning press conference ended. The S&P 500 rose more than 27 points (1.67%). | US stock markets soared on the initial Republican debt ceiling offer. The Dow Jones Industrial Average had risen over 230 points (1.56%) shortly after Boehner's Thursday morning press conference ended. The S&P 500 rose more than 27 points (1.67%). |
| PNC Bank senior economist Gus Faucher said: "This is an indication at least that we will get a deal on the debt ceiling. That's what has been worrying investors more than the government shutdown." | PNC Bank senior economist Gus Faucher said: "This is an indication at least that we will get a deal on the debt ceiling. That's what has been worrying investors more than the government shutdown." |
| Faucher added, however, that the uncertainty was already a drag on the economy, and failure to reach a deal on the debt limit would have a "significant negative and long-lasting impact". | Faucher added, however, that the uncertainty was already a drag on the economy, and failure to reach a deal on the debt limit would have a "significant negative and long-lasting impact". |
| Bruce Bittles, chief investment strategist at RW Baird & Co, said investors had become more concerned about the possibility of a debt default in recent days, but that in general they were "complacent" and had discounted the possibility of a default despite the war of words in Washington. | Bruce Bittles, chief investment strategist at RW Baird & Co, said investors had become more concerned about the possibility of a debt default in recent days, but that in general they were "complacent" and had discounted the possibility of a default despite the war of words in Washington. |
| During the last row over the debt ceiling in 2011, the S&P dropped close to 20%. | During the last row over the debt ceiling in 2011, the S&P dropped close to 20%. |
| "So far we have seen modest sell-offs. My fear is that if we are just kicking the can down the road, that's not a solution," Bittles said. | "So far we have seen modest sell-offs. My fear is that if we are just kicking the can down the road, that's not a solution," Bittles said. |
| Earlier on Thursday the Treasury secretary Jack Lew warned there were unpredictable consequences of the continued brinksmanship, including the possibility that the US could run out of cash within days. | Earlier on Thursday the Treasury secretary Jack Lew warned there were unpredictable consequences of the continued brinksmanship, including the possibility that the US could run out of cash within days. |
| Lew accused Republicans of underestimating the danger of inadvertently triggering a stampede among investors that could rapidly drain remaining reserves. | Lew accused Republicans of underestimating the danger of inadvertently triggering a stampede among investors that could rapidly drain remaining reserves. |
| More than $100bn (£63bn) of the US debt, known as Treasury bonds, is typically reissued every week as investors roll over their loans to the government. | More than $100bn (£63bn) of the US debt, known as Treasury bonds, is typically reissued every week as investors roll over their loans to the government. |
| This process is usually routine and does not add to the $17tn US debt pile, but simply refinances a portion of it. | This process is usually routine and does not add to the $17tn US debt pile, but simply refinances a portion of it. |
| But markets have already been spooked by Republican threats to refuse to extend the debt limit if they do not extract concessions on healthcare reform. | But markets have already been spooked by Republican threats to refuse to extend the debt limit if they do not extract concessions on healthcare reform. |
| Short-term borrowing costs nearly tripled in a bond auction on Tuesday as investors feared there was a risk that interest and capital repayments could be missed. | Short-term borrowing costs nearly tripled in a bond auction on Tuesday as investors feared there was a risk that interest and capital repayments could be missed. |
| A similar wariness to roll over bonds expiring next week could exhaust a $50bn cash reserve at any point, warned Lew. | A similar wariness to roll over bonds expiring next week could exhaust a $50bn cash reserve at any point, warned Lew. |
| "Trying to time a debt limit increase to the last minute could be very dangerous," he said in written congressional testimony. | "Trying to time a debt limit increase to the last minute could be very dangerous," he said in written congressional testimony. |
| "If US bondholders decided they wanted to be repaid rather than continuing to roll over their Treasury investments, we could unexpectedly dissipate our entire cash balance." | "If US bondholders decided they wanted to be repaid rather than continuing to roll over their Treasury investments, we could unexpectedly dissipate our entire cash balance." |
| Answering written questions by members of the Senate finance committee, he added: "I very much fear that miscalculation is something that could have devastating consequences. | Answering written questions by members of the Senate finance committee, he added: "I very much fear that miscalculation is something that could have devastating consequences. |
| "It is impossible to predict with any degree of accuracy when we will run out of money." | "It is impossible to predict with any degree of accuracy when we will run out of money." |
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