Politics & MoneyInvestments

Immigration impasse may shut down federal government

What will HUD and the CFPB do?

The current government spending bill expires at midnight on Saturday so Congress must reach a deal to extend government funding past Friday.

If they don’t, parts of the government will shut down. And, here's how markets analysts are reacting right now.

Over the weekend, President Donald Trump signaled that Democrats are not working with Republican demands in order to find a compromise for Deferred Action for Childhood Arrivals.

This led to Lewis Alexander, US Chief Economist at Nomura, the global investment bank, to send the following message: Immigration Impasse Increases Likelihood of US Government Shutdown.

In that note he warns:  "Authority for ongoing spending by the US Federal government expires after Friday, 19 January. Unless that authority is extended, the Federal Government will have to shut down, as it last did in 2013."

The last time the government shut down, the three-to-four week period reduced fourth-quarter economic growth by as much as 1.4 percentage points, as government workers were furloughed.

But what about the federal agencies that affect the housing business?

Here's the last shutdown contingency plan for the Department of Housing and Urban Development. Shutdowns don’t affect operations at the Consumer Financial Protection Bureau because the agency's funding comes not from Congress but from the Federal Reserve.

Right now, extending government funding through the end of the week and avoiding a shutdown is this week's primary policy issue, says Keefe, Bruyette & Woods investment bank managing director, Brian Gardner.

“Talks last week focused on immigration and border issues, but we doubt there is time to agree to a blockbuster deal that would address Deferred Action for Childhood Arrivals and funding for a wall along the Mexican border,” said KBW analysts in an email this morning.

Brent Nyitray, director of capital markets at iServe Residential Lending agrees with Gardner, as do most analysts this morning.

“The big thing this week will be a continuing resolution to keep the government open. The government will shut down if a budget deal isn't reached by Friday. Democrats are holding out over immigration. Republicans are weighing another short-term funding measure that will last until mid-February,” he said.

KBW is confident the government will not shut down and explains the most likely path to a resolution:

“The alternative is to pass another short-term spending bill (a continuing resolution, or CR) and while there is some nervousness around Washington about he political appetite for another CR, we think there is less of an appetite for a shutdown. We think odds favor a CR but the path to one is not straight, so we think there could be several instances this week when a shutdown looks likely (including after a House Republican retreat, which concludes on Tuesday). In the end, we think Congress will ultimately pass a CR and will keep the government open.”

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