DEBT SHOWDOWN

House preempts Senate, rejecting 'mirror' Reid bill before Senate votes

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After a brutal week on Wall Street - investors lost hundreds of billions of dollars as the markets lost ground every day - pressure is intense to produce an accord before the Asian markets open on Sunday afternoon.

U.S. Capitol in 1921. Photo: Library of Congress

The House measure squeaked through on a 218-210 vote, with 22 Republicans joining united Democrats in opposing the GOP measure, which pairs an immediate $900 billion increase in U.S. borrowing authority along with $917 billion in spending cuts spread over the coming decade.

Friday's roll call came after Boehner had been forced to call off a vote slated for Thursday in the face of tea party opposition to the measure. He added a provision requiring that a second, up to $1.6 trillion debt increase be conditioned on House and Senate passage of a balanced-budget amendment to the Constitution, which would require an unrealistic two-thirds vote by each chamber to send it to the states for ratification.

Boehner's move only cemented Democratic opposition to the measure and complicated prospects for a weekend compromise that could clear both houses and win Obama's signature by next Tuesday's deadline. And by appeasing the tea party by adding the balanced-budget amendment poison pill, Boehner seemed to hand endgame leverage to Reid and Obama.

Boehner said the House bill - before the addition of the balanced-budget amendment - mirrored an agreement worked out with Reid last weekend.

Still, as soon as the measure reached the Senate side of the Capitol, Senate Democrats scuttled it. The vote was 59-41, with all Democrats, two independents and six Republicans joining in opposition.

Reid's alternative measure would raise the debt limit by up to $2.4 trillion, enough to meet a demand by Obama that the increase be sufficient so that Congress doesn't have to wrestle with it again until 2013.

Administration officials say that without legislation in place by the end of Tuesday, the Treasury will no longer be able to pay all its bills. The result could inflict significant damage on the economy, they add, causing interest rates to rise and financial markets to sink.

Executives from the country's biggest banks met with U.S. Treasury officials to discuss how debt auctions will be handled if Congress fails to raise the borrowing limit before Tuesday's deadline.

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