made an overdue interest payment to international bondholders, the state-owned Securities Times reported Friday, an unexpected move that allows the property company to stave off a default.
The Chinese real-estate developer on Thursday sent $83.5 million to the trustee for the dollar bonds, and that financial institution will in turn pay bondholders, the Securities Times reported. The financial paper is run by the Communist Party’s flagship People’s Daily newspaper.
Evergrande was nearing the end of a 30-day grace period before bondholders could send a notice of default to the company after it failed to make the interest payment on about $2.03 billion of dollar bonds on Sept. 23.
A default on those bonds would likely have spiraled into the biggest corporate default in Asia, by enabling creditors to declare defaults on some of Evergrande’s other debts. The company is one of China’s biggest developers, and its most indebted. It had the equivalent of more than $300 billion in total liabilities, including some $89 billion in interest-bearing debt, as of the end of June.
Many international bondholders had expected Evergrande to fail to make its dollar bond payments before the end of the grace period. The company has also skipped other coupon payments in the past few weeks, and has outstanding dollar debt with a total face value of about $20 billion. Advisers to international bondholders said this month they had made little progress in their efforts to engage with Evergrande.
On Wednesday, however, the Shenzhen-based group said in a regulatory filing that it will “use its best effort to negotiate for the renewal or extension of its borrowings or other alternative arrangements with its creditors.”
Evergrande has been trying to raise funds by disposing of assets such as stakes in subsidiaries and a Hong Kong office building that it owns. Last month, it agreed to sell most of its ownership in a Chinese commercial bank to a state-owned enterprise for the equivalent of $1.55 billion. The company had also planned to sell a majority holding in its property-management unit for the equivalent of about $2.6 billion to a smaller rival, but said this week that it had terminated that deal.
Evergrande’s Hong Kong-listed stock has crashed more than 80% this year and its dollar bonds are trading far below face value, indicating skepticism among investors that they will be repaid in full. On Friday, the shares rose 5% in early trading, while its bonds were still at deeply distressed levels that indicate investors still expect the company to ultimately default.
A $4.7 billion, 8.75% Evergrande bond due 2025 was quoted at just 21.75 cents on the dollar Friday morning in Hong Kong, according to Tradeweb, up from 20.5 cents late Thursday.
The developer is the highest-profile casualty of a campaign by Chinese authorities to tame the housing market, in part by tamping down on excessive corporate borrowing through limits on bank lending and restrictions on developers’ leverage known as the “three red lines.”
But the sector as a whole has run up huge debts—more than $5 trillion, including cash raised from home buyers through presales of still-uncompleted apartments, according to economists at Nomura—and is smarting under the new regime.
Contracted sales, which reflect new contracts signed with home buyers, at many developers fell more than 20% or 30% year-over-year in September, and official government statistics show nationwide new-home prices fell slightly last month for the first time since 2015.
Evergrande’s own contracted sales have plunged even more; the developer said this week that its contracted sales “for the month of September 2021 and up till now” totaled the equivalent of just $572 million, far below the $28.5 billion worth of contracted sales it reported in the full two months of September and October 2020.
Several smaller developers, such as Fantasia Holdings Group Co., have recently either defaulted on their debts or demanded investors wait longer for repayment, and prices for the bonds of many developers are trading at deeply distressed levels.
—Frances Yoon contributed to this article.
China Evergrande Group: Stalled Construction, Massive Debts
Write to Elaine Yu at elaine.yu@wsj.com and Quentin Webb at quentin.webb@wsj.com
The US House of Representatives gave final approval on Tuesday to a Senate-passed bill temporarily raising the government’s borrowing limit to $28.9tn, putting off the risk of default at least until early December.
Democrats, who narrowly control the House, maintained party discipline to pass the hard-fought, $480bn debt limit increase. The vote was along party lines, with every yes from Democrats and every no from Republicans.
Joe Biden is expected to sign the measure into law this week, before 18 October, when the treasury department has estimated it would no longer be able to pay the nation’s debts without congressional action.
Republicans insist Democrats should take responsibility for raising the debt limit because they want to spend trillions of dollars to expand social programs and tackle climate change. Democrats say the increased borrowing authority is needed largely to cover the cost of tax cuts and spending programs during Donald Trump’s administration, which House Republicans supported.
House passage warded off concerns that the world’s largest economy would go into default for the first time, but only for about seven weeks, setting the stage for continued fighting between the parties.
The Senate Republican leader, Mitch McConnell wrote to Biden on Friday that he would not work with Democrats on another debt limit increase. McConnell was harshly criticized by Trump, the Republican party’s leader, after the Senate vote.
Lawmakers also have only until 3 December to pass spending legislation to prevent a government shutdown.
The Senate’s vote last week to raise the limit – which had been more routine before the current era of fierce partisanship – turned into a brawl. Republicans tried to link the measure to Biden’s goal of passing multitrillion-dollar legislation to bolster infrastructure and social services while fighting climate change.
At a news conference on Tuesday, the House speaker, Nancy Pelosi, said she was optimistic that Democrats could work out changes to reduce the cost of their social policy plans “in a timely fashion”.
In another sign compromise was possible, progressive Democrats told reporters that most of them wanted to keep all the proposed programs in the multitrillion-dollar plan, while shortening the time period to cut its overall cost.
Biden has suggested a range of more like $2tn rather than the initial $3.5tn target. At a briefing today, the White House press secretary, Jen Psaki, told reporters: “We are at a point where there are choices that need to be made, given that there are fewer dollars that will be spent.”
Psaki said that the conversations are ongoing between White House senior staff and the president as well as key Democrats such as senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona about how to trim the bill and what a smaller package would look like.
Psaki was asked if the president supported Pelosi’s strategy for the “Build Back Better” bill outlined in a letter she sent to caucus members on Monday, passing a bill with fewer programs that will receive more funding. Though she wouldn’t confirm if the president supported that specific strategy, Psaki noted that the bill would be smaller versus the $3.5tn Biden originally proposed and referred to comments Pelosi made during her press conference.
“What [Pelosi] said in that press conference is that ‘if there are fewer dollars to be spent, there are choices that need to be made’, and the president agrees … If it’s smaller than $3.5tn, which we know it will be, then there are choices that need to be made,” said Psaki.
“A bill that doesn’t pass means nothing changes,” Psaki said.
Once the Democratic-controlled House passes the short-term extension, it will be cleared for President Joe Biden’s signature.
Treasury Secretary Janet Yellen has warned lawmakers that the federal government will likely run out of cash by October 18 unless Congress raises the debt ceiling, setting up a ticking clock and high stakes. Congress may not even have that long to act since the deadline is more of a best-guess estimate than a set-in-stone deadline. That dynamic intensified pressure on Democrats and Republicans to reach a deal to address the debt limit.
But the temporary debt limit extension is only a short-term fix and sets up another looming potential fiscal crisis later this year when it runs out.
After weeks of partisan deadlock over the issue, Senate Majority Leader Chuck Schumer announced last week that a debt limit deal had been reached, paving the way for the Senate to vote to pass the agreement. An aide familiar with negotiations told CNN that the agreement increases the ceiling by $480 billion, which is how much the Treasury Department told Congress it would need to get to December 3.
The announcement of the deal came a day after Senate Minority Leader Mitch McConnell publicly floated a debt ceiling proposal as an offer to Democrats, a move that sparked negotiations between the two parties to reach an agreement.
House Majority Leader Steny Hoyer released a statement following the Senate’s passage of the stopgap bill saying that the House would convene on Tuesday to take up and pass the measure.
Why a crisis still looms
The problem is that the dispute between the two parties over how to address the issue has not been solved and action will be required in just a few weeks to again avert crisis.
Republicans have been insistent that Democrats must act alone to address the debt limit through a process known as budget reconciliation. Democrats have argued the issue is a bipartisan responsibility. They have so far largely dismissed the possibility of using reconciliation, arguing that process is too lengthy and unwieldy and that the risk of miscalculation would be too high.
McConnell sent a letter to Biden at the end of last week with a warning. “I write to inform you that I will not provide such assistance again if your all-Democrat government drifts into another avoidable crisis,” he wrote.
“I will not be a party to any future effort to mitigate the consequences of Democratic mismanagement. Your lieutenants on Capitol Hill now have the time they claimed they lacked to address the debt ceiling through standalone reconciliation, and all the tools to do it. They cannot invent another crisis and ask for my help,” McConnell wrote.
Raising the stakes even higher, lawmakers will also have to deal with the expiration of government funding in the same time frame as the debt limit after separately passing a short-term extension to avert a shutdown that lasts only through December 3.
CNN’s Kristin Wilson, Annie Grayer and Matt Egan contributed.
As China enters what many economists say is the final stage of one of the largest real-estate booms in history, it is confronting a staggering bill: More than $5 trillion in debt that developers took on when times were good, according to economists at
Nomura Holdings Inc.
That debt is nearly double what it was at the end of 2016 and is more than the entire economic output of Japan, the world’s third-largest economy, last year.
Global markets are braced for a possible wave of defaults, with warning signs flashing over the debt of about two-fifths of development companies that have borrowed from international bond investors.
Chinese leaders are getting serious about addressing the debt, with a series of moves meant to curb excessive borrowing. But doing so without torpedoing the property market, crippling more developers and derailing the country’s economy is quickly turning into one of the biggest economic challenges Chinese leaders have faced in years, and one that could reverberate globally if mismanaged.
Luxury developer
Fantasia Holdings Group Co.
failed to repay $206 million in dollar bonds that matured Oct. 4. In late September, Evergrande, which has more than $300 billion in obligations, missed two interest-payment deadlines for bonds.
Asia’s junk-bond markets suffered a wave of selling last week. On Friday, bonds from 24 of the 59 Chinese development companies in an ICE BofA index of Asian corporate dollar bonds were trading at yields of above 20%, levels that indicate high risk of default.
Some prospective home buyers are balking, forcing the companies to cut prices to raise cash, and potentially accelerating their slide if the trend continues.
The Evergrande Fairyland complex in Lu’An, China, with towers under construction. Evergrande recently missed two bond-interest deadlines.
Photo:
Raul Ariano for The Wall Street Journal
Total sales among China’s 100 largest developers were down by 36% in September from a year earlier, according to data from CRIC, a research unit of property services firm
e-House (China) Enterprise Holdings Ltd.
It showed that the 10 biggest developers, including China Evergrande,
Country Garden Holdings Co.
and
China Vanke Co.
, saw sales down 44% from a year ago.
Economists say that most Chinese developers remain relatively healthy. Beijing also has the firepower and tight control of the financial system needed to prevent a so-called Lehman moment in which a corporate collapse snowballs into a financial crisis, they say.
In late September, The Wall Street Journal reported that China had asked local governments to prepare for problems potentially intensifying at Evergrande.
But many economists, investors and analysts agree that even for healthy ventures, the underlying business model—in which developers use debt to fund a steady churn of new construction despite demographics becoming less favorable for new housing—is likely to change. Some developers might not survive the transition, they say.
Of particular concern is some developers’ practice of relying heavily on “presales,” in which buyers pay in advance for still-uncompleted apartments.
The practice, more common in China than the U.S., means developers are in effect borrowing interest-free from millions of households, making it easier to continue expanding but potentially leaving buyers without finished apartments should the developers fail.
Presales and similar deals were the sector’s biggest funding source this year through August, according to the National Bureau of Statistics of China.
A model of a residential compound by China Vanke, a large developer, at its showroom in Dongguan, China.
Photo:
china stringer network/Reuters
“There is no return to the previous growth model for China’s real-estate market,” said
Houze Song,
a research fellow at the Paulson Institute, a Chicago think tank focused on U.S.-China relations. He said China is likely to keep in place a set of limits on corporate borrowing it imposed last year, known as the “three red lines,” which helped trigger the recent distress at some developers, though he said China might ease some other curbs.
While Beijing has avoided clear public statements on its plans for dealing with the most indebted developers, many economists believe leaders have no choice but to keep the pressure on them.
Policy makers appear determined to revamp a model driven by debt and speculation as part of President
Xi Jinping’s
broader efforts to defuse hidden risks that could destabilize society, especially ahead of important Communist Party meetings next year. Mr. Xi is widely expected then to break with precedent and extend his rule into a third term.
Beijing is worried that after years of rapid home-price gains, some people may be unable to get on the housing ladder, potentially fueling social discontent as wealth gaps widen, economists say. Young couples in large cities are beginning to get priced out, making it harder for them to start families. The median apartment in Beijing or Shenzhen now costs more than 40 times the median family annual disposable income, according to J.P. Morgan Asset Management.
Authorities have said they are worried about the property market posing risks to the financial system. Reining in the developers’ business models and limiting debt, however, is almost certain to slow investment and cause at least some downturn in the property market, which is one of the biggest drivers of China’s growth.
The real-estate and construction industries account for a large part of China’s economy. A 2020 paper by researchers
Kenneth S. Rogoff
and
Yuanchen Yang
estimated that the industries, broadly construed, accounted for 29% of China’s economic activity, far more than in many other countries. Slower growth in housing could spill into other parts of the economy, affecting consumer spending and employment.
Government statistics show about 1.6 million acres of residential floor space was under construction at the end of last year. That was equal to about 21,000 towers with the floor area of the Burj Khalifa in Dubai, the world’s tallest building.
As restrictions on borrowing imposed last year kicked in, housing construction tumbled in August to 13.6% below its pre-pandemic level, calculations by Oxford Economics show.
The revenue local governments earn by selling land to developers fell by 17.5% in August from a year earlier. Local governments, which are also heavily indebted, count on land sales for much of their revenue.
The Luwan 68 development by Fantasia Holdings Group in Shanghai. The luxury developer failed to repay $206 million of dollar bonds that matured on Oct. 4.
Photo:
Qilai Shen/Bloomberg News
A further slowdown also would risk exposing banks to more bad loans. Outstanding property loans—primarily mortgages, but also loans to developers—accounted for 27% of China’s total $28.8 trillion in bank loans at the end of June, according to Moody’s Analytics.
As pressure on housing mounts, several research houses and banks have cut China’s growth outlook. Oxford Economics on Wednesday lowered its forecast for China’s third quarter year-on-year gross domestic product growth to 3.6% from 5% previously. It trimmed its 2022 growth forecast for China to 5.4% from 5.8%.
As recently as the 1990s, most of China’s city residents lived in drab dwellings provided by state-owned employers. When market reforms started transforming the country and more people moved to cities, China needed a massive new supply of higher-quality apartments. Private developers stepped in.
Over the years, they added millions of new units in modern, well-maintained high-rises. In 2019, new homes made up more than three-quarters of home sales in China, versus less than 12% in the U.S., according to data cited by Chinese property broker
KE Holdings Inc.
in a listing prospectus last year.
In the process, the developers became much bigger than anything seen in the U.S. The largest U.S. home builder by revenue,
D.R. Horton Inc.,
reported $21.8 billion of assets at the end of June. Evergrande had some $369 billion. Its assets included vast land reserves and 345,000 unsold parking spaces.
For much of the boom, the developers were filling a need. In more recent years, policy makers and economists began to fret that much of the market was driven by speculation.
Chinese households are restricted from investing abroad, and domestic bank deposits offer low returns. Many people are wary of the country’s boom-and-bust stock markets. So some have poured money into housing, in some cases buying three or four units without any intention of living in them or renting them out.
As developers bought more locations to build on, land sales pumped up national growth statistics. Dozens of entrepreneurs who had founded development companies showed up in lists of Chinese billionaires. Ten of the 16 soccer clubs in the Chinese Super League are wholly or partly owned by developers.
Residential skyscrapers being built in Shanghai, in November 2016.
Photo:
Johannes EISELE/AFP via Getty Images
The real-estate giants have borrowed not only from banks but also from shadow-banking outfits known as trust companies and from individuals who put their savings into investments called wealth-management products. Abroad, they became a mainstay of international junk-bond markets, offering juicy yields to get deals done.
One builder,
Kaisa Group Holdings Ltd.
, defaulted on its debt in 2015, yet was able to keep borrowing and expanding afterward. Two years later it spent the equivalent of $2.1 billion to buy 25 land parcels, and in 2020 spent $7.3 billion for land. This summer, Kaisa sold $200 million of short-term bonds yielding 8.65%.
Nomura estimated that as of June, Chinese developers had racked up debts of $5.2 trillion. It said the biggest share, 46%, was in bank loans. Bond markets accounted for about 10%, including the equivalent of $217 billion of dollar bonds, many of them junk-rated.
By last year, Chinese policy makers had had enough. In August 2020, they introduced the three-red-lines rules limiting how much borrowing developers could do. Some companies with short-term obligations they couldn’t pay without new funding had to start discounting apartments to raise money.
Authorities have tried to curb demand in some places by slowing mortgage lending. They have put caps on existing-home prices in about a dozen cities to tame speculation, according to state media reports.
When old-fashioned funding sources like bank loans grew harder to access, developers became more reliant on presales of unfinished apartments. These made up 26% of the debt in Nomura’s tally.
Presales are often recorded as contract liabilities, an item that shows up on the balance sheets of sector heavyweights such as Evergrande, Country Garden, China Vanke,
Sunac China Holdings Ltd.
and
China Resources Land Ltd.
For these five combined, contract liabilities have jumped 42% in the past three years to the equivalent of $341 billion as of the end of June, FactSet data show.
Developers have also made more use of other liabilities that, like presales, don’t strictly count as debt, such as borrowing more from business partners by taking longer to pay contractors or suppliers.
The construction site of a Vanke residential building in Dalian, China, in 2019.
Photo:
Reuters
Goldman Sachs Group Inc.
analysts recently estimated Evergrande had the equivalent of $156 billion of off-balance-sheet debt and contingent liabilities, including mortgage guarantees to help home buyers get loans.
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The other problem for developers, and for China’s property market overall, is the way some of the trends that fueled the boom are reversing.
China’s population is aging. Its workforce has been shrinking since 2012, and official forecasts last year predicted the total population would peak in 2027.
Homeownership is already over 90% for urban households in China, among the highest in the world, according to Mr. Rogoff and Ms. Yang. They cited earlier Chinese research saying that as of late 2018, 87% of home purchases were by buyers who already had at least one dwelling.
Julian Evans-Pritchard,
an economist at Capital Economics, said his firm has looked at developers’ ability to meet their obligations from cash holdings and doesn’t think most are on the brink of default. But, citing changing demographics and reduced internal migration, he said “we’re now at a turning point where actually demand for new urban housing is going to decline over the coming decade. So they’re going to be fighting over a shrinking pie.”
Deng Lin,
a 33-year-old lawyer in Shanghai, planned to sell two properties she owns to buy a bigger one after she gave birth to twins this summer. The government’s clampdown on debt risks derailing her plan of upgrading to a three-bedroom, which she estimates could cost up to $1.86 million.
Tightened mortgage rules means she would have to pay 80% upfront. Banks have been slow to approve her loan application.
“There’s simply too much uncertainty in the market,” she said.
—Anniek Bao contributed to this article.
Write to Quentin Webb at quentin.webb@wsj.com and Stella Yifan Xie at stella.xie@wsj.com
Mitch McConnell, the Republican leader in the Senate, sought to fight his way out of a corner on Friday by releasing an angry letter in which he blamed Democrats for the impasse over the debt ceiling he broke by ending a refusal to co-operate he had said was absolute.
In the letter to Joe Biden, McConnell complained about a speech in which the Democratic majority leader, Chuck Schumer, attacked Republicans for their behaviour.
Lamenting Schumer’s lack of civility – which prompted angry scenes in the Senate – McConnell levelled a string of insults at his opposite number.
“Last night,” the minority leader wrote, late on Friday, “in a bizarre spectacle, Senator Schumer exploded in a rant that was so partisan, angry and corrosive that even Democratic senators were visibly embarrassed by him and for him.
“This tantrum encapsulated and escalated a pattern of angry incompetence from Senator Schumer … this childish behavior only further alienated the Republican members who helped facilitate this short-term patch. It has poisoned the well even further.”
Democrats argue it was McConnell who poisoned the well by refusing to co-operate with raising the debt limit, a step they took repeatedly with Donald Trump in power. Experts say a US default would be catastrophic for the global economy.
McConnell insisted: “In light of Senator Schumer’s hysterics and my grave concerns about the ways that another vast, reckless, partisan spending bill would hurt Americans and help China, I will not be a party to any future effort to mitigate the consequences of Democratic mismanagement.”
McConnell also spoke to Biden, media outlets reported.
The Kentuckian made his move a day after he and 10 other Republicans provided decisive support for a $480bn federal debt limit rise, enough to last two months. Treasury secretary Janet Yellen had said that without such a rise, the US would default on its debts by mid-October.
Some Republicans criticized McConnell for not holding out longer, which they said would have sharpened their contention that a multibillion-dollar package of Biden’s domestic spending priorities, currently making its way through Congress, is wasteful and damaging.
Trump, who remains influential in the party and will stage a rally in Iowa on Saturday, was among those to lambast McConnell for what Lindsey Graham, of South Carolina, called his “complete capitulation”.
In his speech, Schumer lauded Democrats for overcoming a “Republican-manufactured crisis. Despite immense opposition from Leader McConnell and members of his conference, our caucus held together and we have pulled our country back from the cliff’s edge that Republicans tried to push us over”.
As Schumer spoke, Joe Manchin of West Virginia, a key centrist Democrat, was seen to bury his head in his hands. Among Republicans angered by Schumer’s lack of comity and politesse was Mitt Romney of Utah – who had voted against helping raise the debt ceiling.
Romney told reporters: “There’s a time to be graceful and there’s a time to be combative, and that was a time for grace.”
John Thune of South Dakota, a member of Republican leadership who voted with McConnell, said Schumer was “totally out of line”. Of his own confrontation with the New Yorker, he said: “I let him have it.”
But Chris Murphy, a Democrat from Connecticut, tweeted: “Some of my Republican colleagues didn’t like that Schumer called them out … just unreal that they thought they deserved applause for courting economic disaster and then, at the very last minute, delivering the absolute minimum number of votes to avoid it.”
One way for Democrats to raise the debt limit on their own would be to shield debt legislation from filibusters, delays that mean 60 votes are needed in the 50-50 Senate.
Two key Democrats, Manchin and Kyrsten Sinema of Arizona, oppose that, as they have opposed ending the filibuster to protect voting rights or Biden policy priorities. Republicans have said one factor in McConnell providing the two-month debt lifeline was fear that Manchin and Sinema might support ending filibusters on debt legislation.
Democrats accused McConnell of creating a crisis over a debt of around $28tn which covers spending already approved – including around $7tn under Trump.
Sen. Mitch McConnell, R-Ky., has informed President Joe Biden that he, along with other Republican senators, will not vote to raise the debt ceiling in December should Democrats face “another avoidable crisis.”
“Last night, Republicans filled the leadership vacuum that has troubled the Senate since January,” McConnell said in a letter to Biden, referencing a vote by the Senate Thursday night, supported by 11 Republicans, to increase to the federal debt ceiling. “I write to inform you that I will not provide such assistance again if your all-Democrat government drifts into another avoidable crisis.”
Senate Majority Leader Chuck Schumer, D-N.Y., had “three months’ notice to handle one of his most basic governing duties,” McConnell wrote.
“Amazingly, even this proved to be asking too much,” McConnell wrote.
McConnell also targeted Schumer for his “rant” following the vote to raise the debt ceiling.
“This tantrum encapsulated and escalated a pattern of angry incompetence from Senator Schumer,” charged.
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“Your lieutenants on Capitol Hill now have the time they claimed they lacked to address the debt ceiling through standalone reconciliation, and all the tools to do it,” he wrote. “They cannot invent another crisis and ask for my help.”
Democrats have claimed voting on the bill through the reconciliation process, which would allow them to pass it with 50 votes — presumably all Democrats — would be too cumbersome.
On Thursday, Senators, including 11 Republicans, voted to approve a short-term increase to the federal debt ceiling, ending a weekslong standoff on Capitol Hill and possibly averting a default that could have triggered a recession.
The 11 Republicans who voted to allow the measure to proceed were Senate Minority Leader Mitch McConnell, Minority Whip John Thune, John Cornyn, Lisa Murkowski, Shelley Moore Capito, Richard Shelby, Rob Portman, Susan Collins, John Barrasso, Mike Rounds and Roy Blunt.
Schumer’s office did not immediately respond to a request for comment.
Fox News’ Jack Durschlag contributed to this article.
Senate GOP Leader Mitch McConnellAddison (Mitch) Mitchell McConnell Trump urges GOP senators to vote against McConnell debt deal Senate approves short-term debt ceiling increase On The Money — Presented by NRHC — Senate slowly walks back from debt disaster MORE (R-Ky.) warned President BidenJoe BidenArkansas lawmakers advance bill prohibiting businesses from demanding workers’ vaccine status Senate approves short-term debt ceiling increase On The Money — Presented by NRHC — Senate slowly walks back from debt disaster MORE Friday that Republicans won’t help raise the debt ceiling later this year, and stated that a recent speech by Majority Leader Charles SchumerChuck Schumer Trump urges GOP senators to vote against McConnell debt deal Senate approves short-term debt ceiling increase The Hill’s Morning Report – Presented by Facebook – Senate nears surprise deal on short-term debt ceiling hike MORE (D-N.Y) had “poisoned the well.”
“Last night, Republicans filled the leadership vacuum that has troubled the Senate since January. I write to inform you that I will not provide such assistance again if your all-Democrat government drifts into another avoidable crisis,” McConnell wrote in the letter to Biden.
The letter comes after 11 Republicans helped advance a short-term debt ceiling extension on Thursday night, after a weeks-long standoff where McConnell and his conference said that Democrats would have to raise the debt ceiling on their own through a budget process known as reconciliation.
But on Wednesday McConnell backtracked, offering to let Democrats pass a short-term extension that is expected to last into early December.
McConnell’s letter is a warning to Democrats, but also gives an early signal to his own members that he won’t give Democrats the same offramp in December. The decision by McConnell this week to open the door to a short-term debt extension earned him an unusually intense level of criticism from the Senate GOP caucus, including behind-the-scenes breaks with members of his own leadership team.
Republicans were further frustrated on Thursday night by Schumer, who railed against them right after 11 of them voted to advance the debt ceiling bill.
Schumer blasted the GOP debt ceiling strategy, accusing them of playing a “dangerous and risky partisan game” and saying Democrats were able to “pull our country back from the cliff’s edge that Republicans tried to push us over.”
McConnell appeared to reference Manchin, who could be seen briefly with his hands over his face during Schumer’s speech.
“Last night, in a bizarre spectacle, Senator Schumer exploded in a rant that was so partisan, angry, and corrosive that even Democratic Senators were visibly embarrassed by him and for him. This tantrum encapsulated and escalated a pattern of angry incompetence from Senator Schumer,” McConnell wrote.
McConnell warned that Schumer’s “childish behavior” had “alienated” GOP senators who helped advance the short-term debt increase and “poisoned the well even further.” They are likely the same GOP senators Schumer would need to lean on to raise the debt ceiling outside of reconciliation later this year.
“I am writing to make it clear that in light of Senator Schumer’s hysterics and my grave concerns about the ways that another vast, reckless, partisan spending bill would hurt Americans and help China, I will not be a party to any future effort to mitigate the consequences of Democratic mismanagement,” he added.
Schumer gave a speech condemning Republicans before the Senate voted to raise the debt ceiling.
Manchin and Republicans said it was out of line after 11 Republicans helped Democrats hold the vote.
Manchin reportedly told Schumer his speech was “fucking stupid.” Republicans said it was “time to be graceful.”
Democratic Sen. Joe Manchin sided with Senate Republicans in strongly disapproving of a fiery, partisan speech by Senate Majority Leader Chuck Schumer on Thursday night before a vote to raise the debt ceiling by $480 billion.
Manchin reportedly told Schumer his speech was “fucking stupid,” while Republican Sen. Mitt Romney of Utah said it was a “time to be graceful” after 11 Senate Republicans had voted to break a GOP filibuster and allow the vote to take place.
In his 3-1/2-minute speech, Schumer said the Senate was about to avoid the “first-ever Republican-manufactured default,” chastising Republicans as playing a “dangerous and risky partisan game” while engaging in “brinksmanship” for debts the US had already incurred.
“For the good of America’s families, for the good of our economy, Republicans must recognize in the future that they should approach fixing the debt limit in a bipartisan way,” Schumer said. “We hope Republicans will join in enacting a long-term solution to the debt limit in December. We’re ready to work with them.”
The Senate reached a two-month deal on raising the debt limit after Minority Leader Mitch McConnell made an initial offer to Democrats on Wednesday. Former President Donald Trump accused McConnell of “folding to the Democrats,” but Republicans seemed to pay that little mind.
As Schumer spoke, Manchin could be seen behind him placing his face in his hands and shaking his head in disapproval.
“Yesterday, Senate Republicans finally realized that their obstruction was not going to work,” Schumer said. “I thank, very much thank, my Democratic colleagues for our showing our unity in solving this Republican-manufactured crisis.”
Manchin, still shaking his head, eventually got up from his seat and walked away.
“Today’s vote is proof positive that the debt limit can be addressed without going through the reconciliation process, just as Democrats have been saying for months,” Schumer continued. He concluded by touting Democrats’ “Build Back Better” agenda.
—CSPAN (@cspan) October 8, 2021
Punchbowl News reported that Manchin told Schumer his speech was “fucking stupid.” The West Virginia senator told reporters outside the chamber that he didn’t think the speech was “appropriate at this time,” though he denied dropping an f-bomb.
“You’re confusing me with my good friend Jon Tester from Montana,” Manchin said, referring to the notoriously foul-mouthed Democratic senator.
—Manu Raju (@mkraju) October 8, 2021
Republicans also said they thought the speech was inappropriate. Minority Whip John Thune, one of the 11 Republicans who helped Democrats break the filibuster, said it was “totally out of line.”
“I just thought it was incredibly partisan speech after we had just helped them solve a problem,” he told reporters.
—Frank Thorp V (@frankthorp) October 8, 2021
Romney, who did not vote for cloture, reportedly told Schumer, “There’s a time to be graceful and there’s a time to be combative. That was a time for grace and common ground.”
Sen. Mike Rounds of South Dakota, another one of the 11 Republicans who voted with Democrats, reportedly called it a “classless speech.”
Ultimately, the Senate voted 50-48, along party lines, to raise the debt ceiling by $480 billion. Lawmakers will have to vote again by December 3, when the federal government is expected to again hit the debt limit at its current rate of spending.
US economy adds far fewer jobs than expected in September
Meanwhile, our business live blog is tracking the September jobs figures that came out just now and it’s not looking good.
The US economy expected to add 500,000 more jobs in September, but in reality added just 194,000 jobs.
Follow here for more information:
14:56
Democrats are drawing a line in the sand when it comes to the raising the debt limit again in the next few weeks.
Republicans have said from the start that they want Democrats to raise the limit “on their own” via budget reconciliation, a lengthy and cumbersome process that will stymie the Democratic legislative agenda.
Congress at most is allowed to go the budget reconciliation route just three times a year, and Democrats have already used it to pass a $1.9tn Covid-19 relief bill and are now trying to use to pass Biden’s $3.5tn “human infrastructure” reconciliation bill to boost safety net, health and environmental programs.
In addition, the Democrats have the battle for voting rights ahead of them.
Senate Chris Coons is coming out strong in saying that Democrats won’t use reconciliation to deal with the debt ceiling. “We didn’t do it this time, won’t do it next time,” he said.
The Hill (@thehill)
Sen. Chris Coons: “Senator McConnell has put out a statement that he expects over the next six weeks we will use reconciliation to deal with the debt ceiling. We won’t. We didn’t do it this time, we won’t do it next time.” pic.twitter.com/1s1x5oZJT7
October 8, 2021
14:39
Here is the White House statement on Senate passing yesterday the deal to raise the debt limit by $480bn through 3 December. From White House press secretary Jen Psaki:
Tonight’s votes are welcome steps forward in averting a default that would have been devastating for our economy and for working families. President Biden looks forward to signing this bill as soon as it passes the House and reaches his desk. His focus remains on the task before us of swiftly passing his economic agenda and making vital investments in jobs, competitiveness, and lower prices for the middle class.
These votes underscore that raising the debt limit is a shared responsibility to pay for debts incurred in the past by Presidents and Congresses of both parties – debt that has nothing to do with President Biden’s fully paid-for economic agenda. As we move forward, there must be no question of whether America will pay its bills; Congress must address the debt limit in December and beyond – just as we’ve done almost 80 times over the last 60 years. Eleven Republicans did their part tonight, ending the filibuster and allowing Democrats to do the work of raising the debt limit. As we approach the coming months, we hope that even more Republicans will join Democrats in responsibly addressing the debt limit instead of choosing default or obstruction.
We cannot allow partisan politics to hold our economy hostage, and we can’t allow the routine process of paying our bills to turn into a confidence-shaking political showdown every two years or every two months.
14:21
Debt limit deal heads to the House amid partisan tensions
Hello, live blog readers. Happy Friday.
We’re not done with the debt limit deal yet – and, of course, let’s all remember, we won’t be done with the debt limit for a while as we’ll have to do this all again in a few weeks because the deal only extends the debt ceiling by $480bn through 3 December.
With a 50-48 vote, the Senate approved the deal Thursday night to extend the government’s borrowing authority, with the House coming back from recess early to vote on it Tuesday.
Politico is reporting that “a shouting match” erupted on the Senate floor after the vote, with Republican senators Mitt Romney and John Thune none too pleased with majority leader Chuck Schumer and what they thought was an ungracious speech.
Here’s video of the heated exchange – Schumer is sitting to the middle left when he is approached by Romney and Thune.
Jeremy Art (@cspanJeremy)
.@playbookdc @politico leads with “shouting match” on Senate floor after debt limit vote when Senators Romney and Thune confronted Senate Majority Leader Schumer.
Here’s the @cspan clip. pic.twitter.com/tWC072o8j3
October 8, 2021
Schumer had lambasted the Republicans for playing a “dangerous and risky partisan game” and said Democrats were able to “pull our country back from the cliff’s edge that Republicans tried to push us over.”
The Hill (@thehill)
.@SenSchumer: “Our caucus held together and we pulled our country back from the cliff’s edge that the Republicans tried to push us over.” pic.twitter.com/RG7hexV2Wi
October 8, 2021
The Republicans had twice used the filibuster to block the Democrats from raising the debt limit, and were threatening to do it once again before the deal. Their argument was that Democrats needed to raise the limit “on their own” via budget reconciliation, a lengthy and cumbersome process that would have consequences for the Democrats’ future legislative agenda.
Democrats then essentially bluffed by threatening a change to the filibuster rules, after which minority leader Mitch McConnell offered up the deal.
Frank Thorp V (@frankthorp)
THUNE, who voted yes on cloture said of Schumer’s speech: “I thought was totally out of line”
“I just thought it was incredibly partisan speech after we had just helped them solve a problem,” he said.
“I let them have it,” he said.
October 8, 2021
Burgess Everett (@burgessev)
Romney went up to Schumer after his speech to express his displeasure. Schumer hammered Republicans during his speech
Romney explained it this way: “there’s a time to be graceful and there’s a time to be combative. That was a time for grace and common ground”
October 8, 2021
Centrist Democratic senator Joe Manchin could be seen putting his head in his hands during Schumer’s address, which he later called “inappropriate”.
Caitlin Emma (@caitlinzemma)
Manchin: “Chuck’s frustration was there. But that was not a way to take it out. We just disagree. I’d have done it differently.”
Claims he did *not* say it was a f–king embarrassment. https://t.co/nJnH2HK6hA
October 8, 2021
Meanwhile, top Senate Republicans are now advancing a disinformation campaign over the debt ceiling, distorting the reasons for needing to raise the nation’s borrowing cap, Hugo Lowell reports.
Senators – including 11 Republicans — voted to approve a short-term increase to the federal debt ceiling on Thursday night, ending a weekslong standoff on Capitol Hill. Sen Lindsey Graham, R-S.C., said Republicans dug themselves into a hole for ‘folding’ during an appearance on “Hannity” Thursday night.
SENATE VOTES TO LIFT DEBT CEILING BY $480B
Sen. Lindsey Graham: “Well, we screwed up. For two months, we promised our base and the American people that we would not help the Democratic Party raise the debt ceiling so they could spend $3.5 to $5 trillion through reconciliation. At the end of the day, we blinked. Two things have happened: We let our people down, and we made Democrats believe that we are all talk and no action. At the end of the day, every Republican voted against raising the debt ceiling, every Democratic senator voted for it. But we had a process in place. We made a promise, for two months, that we would make them do it without our help and we folded, and I hate that. We’re in a hole; we’ve got to dig out of this hole and we can. We shot ourselves in the foot tonight, but we will revisit this issue in December.”
