Wall Street braces for more deadline drama in Congress

House passes Homeland Security funding bill
House passes Homeland Security funding bill

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    House passes Homeland Security funding bill

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House passes Homeland Security funding bill 02:47

New York (CNN)Congress might have avoided a shutdown of the Department of Homeland Security, but eyes are still rolling on Wall Street.

The recent political drama surrounding the DHS -- which culminated in lawmakers barely preventing the agency from shutting down late Friday night -- was an unpleasant reminder for the finance industry of what's likely to come later this year when Congress confronts several other critical deadlines.
In the fall, lawmakers will need to pass a spending bill to keep the government funded. There is also an upcoming deadline is to raise the so-called "debt ceiling," a cap on how much the U.S. government can borrow to meet its financial obligations.
And an even more time-sensitive priority for the business community is keeping the Export-Import Bank alive. A temporary reauthorization from last year extended the agency's charter through June, but Congress must pass another bill to keep the bank running past this summer -- something many conservatives aren't interested in.
    In all of these scenarios, the financial and business communities fully anticipate congressional dysfunction in its full glory — plenty of hand-wringing, last-minute standoffs and political grand-standing.
    "Each side has to look like they're fighting to the death for dramatic effect and we expect them to," said Tim Pawlenty, CEO of the Financial Services Roundtable, a trade group representing a range of financial firms including banks and insurance companies. "The drama has become an unnecessary prerequisite to getting a deal done."
    The DHS funding debacle last week exposed an ideological rift within the GOP between conservatives taking a hardline and leadership seeking to avoid a crisis.
    There is a widespread expectation on Wall Street that this split could lead to more infighting later this year. This dynamic could once again take Congress dangerously close to the brink when it comes time to raise the debt ceiling and fund the government.
    The DHS funding fight "showed that there's a massive divide among the Republican Party which will complicate negotiations for a budget plan," said Chad Morganlander, a portfolio manager at Stifel, Nicolaus & Company.
    "The more conservative voices in the House essentially threw a wrench into Boehner's efforts to get DHS funding going, and I think maybe this serves as a litmus test for what they can do in the fall," said Robbert Van Batenburg, director of market strategy at the brokerage firm Newedge.
    But for now, most in the financial services world are feeling confident that Congress will avoid the worst case scenario: a repeat of 2013 when political fighting led to a 16-day partial government shutdown and raised real questions about whether the government's borrowing cap would be raised in time.
    "It probably goes down to the last minute because that's the way Congress operates," said Brian Reynolds, chief market strategist with Rosenblatt Securities.
    But the prospects are less clear for another top business priority: keeping Ex-im alive.
    The government agency provides loans and other services for companies that export and import goods, and its charter needs congressional approval.
    But a significant wing of the GOP says Ex-Im unfairly benefits large corporations like Boeing and Caterpillar and has advocated for shutting the agency down altogether.
    Ex-Im supporters who have been ramping up lobbying efforts in Washington since last year fear that the agency could become a casualty of the GOP's ideological split.
    "The reality is, on many of these issues, there's only so much control that the business community has on the situation," said Christopher Wenk, senior director of international policy at the U.S. Chamber of Commerce. "We depend on the wise leaders on the Hill, the adults up there, to find ways to govern, and all we can do on issues like Ex-Im is to talk about how it effects jobs on communities across the country."
    The congressional dysfunction that Wall Street has become so familiar with over the years also doesn't bode well for most other items on the business community's wish-list for this Congress.
    Joseph Quinlan, chief market strategist at U.S. Trust, said "the bar is pretty low for what people expect out of Washington."
    "Trade, immigration, corporate tax reform, infrastructure and so forth — that's what the Street wants and it would get excited if there was some movement or momentum," said Quinlan. "But they're not expecting much."