- Associated Press - Wednesday, October 16, 2013

WASHINGTON — Senate leaders reached agreement Wednesday to avert a threatened Treasury default and reopen the government after a partial, 16-day shutdown, according to a Republican senator who also said the House might vote first on the plan to speed its approval.

“I understand they’ve come to an agreement but I’m going to let the leader announce that,” Sen. Kelly Ayotte, R-N.H., said as she walked into a meeting of Senate Republicans called to review details of the emerging deal struck by Senate Majority Leader Harry Reid and GOP Leader Mitch McConnell.

Officials said the proposal called for the Treasury to have authority to continue borrowing through Feb. 7, and the government would reopen through Jan. 15.

Speaker John Boehner and the House Republican leadership met in a different part of the Capitol to plan their next move.

The developments came one day before the deadline Treasury Secretary Jack Lew had set for Congress to raise the current $16.7 trillion debt limit. Without action by lawmakers, he said, Treasury could not be certain it had the ability to pay bills as they come due.

House Speaker John Boehner of Ohio arrives on Capitol Hill, Wednesday, Oct. 16, 2013, in Washington.   Chaos among Republicans in the House of Representatives has left it to bipartisan leaders in the Senate to craft a last-minute deal to fend off a looming U.S. default and to reopen the federal government as a partial shutdown entered its 16th day.    (AP Photo/Carolyn Kaster)
House Speaker John Boehner of Ohio arrives on Capitol Hill, Wednesday, Oct. ... more >

On Wall Street, stocks rose in early trading amid strong corporate earnings and traders’ hopes for a last-minute deal to avoid a U.S. government default. But rates on short-term U.S. government debt also rose as investors braced for the possibility that the borrowing limit wouldn’t be raised in time for the U.S. to continue paying all its bills on time.

There were some dire warnings from the financial world a day after the Fitch credit rating agency said it was reviewing its AAA rating on U.S. government debt for possible downgrade.

John Chambers, chairman of Standard & Poor’s Sovereign Debt Committee, told “CBS This Morning” on Wednesday that a U.S. government default on its debts would be “much worse than Lehman Brothers,” the investment firm whose 2008 collapse led to the global financial crisis.

Billionaire investor Warren Buffett told CNBC he doesn’t think the federal government will fail to pay its bills, but “if it does happen, it’s a pure act of idiocy.”

Rep. Steve King, R-Iowa, a tea party favorite, said he was not worried about the prospect of a U.S. default.

“We are going to service our debt,” he told CNN. “But I am concerned about all the rhetoric around this ….I’m concerned that it will scare the markets.”

Aides to Reid and McConnell said the two men had resumed talks, including a Tuesday night conversation, and were hopeful about striking an agreement that could pass both houses.

It was expected to mirror a deal the leaders had neared Monday. That agreement was described as extending the debt limit through Feb. 7, immediately reopening the government fully and keeping agencies running until Jan. 15 — leaving lawmakers clashing over the same disputes in the near future.

It also set a mid-December deadline for bipartisan budget negotiators to report on efforts to reach compromise on longer-term issues like spending cuts. And it likely would require the Obama administration to certify that it can verify the income of people who qualify for federal subsidies for medical insurance under the 2010 health care law.

But that emerging Senate pact was put on hold Tuesday, an extraordinary day that highlighted how unruly rank-and-file House Republicans can be, even when the stakes are high. Facing solid Democratic opposition, Boehner tried in vain to write legislation that would satisfy GOP lawmakers, especially conservatives.

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