With debt deal, relief on Wall St.

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Wall Street is greeting the drama-free hike to the debt ceiling with a sigh of relief.

Ever since Republicans took control of the House in 2010, the financial sector has had to keep a close eye on Congress when it comes to the borrowing limit, with fiscal standoffs suddenly commonplace.

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But on Wednesday, a Congress that has made a habit of pushing the debt limit fight to the final days approved a borrowing hike with plenty of time and relatively little suspense.

“Getting it done well in advance of the date, obviously it’s good for the markets. It’s good for the economy, it’s good for our nation, and it sends a great signal internationally,” said Rob Nichols, president and CEO of the Financial Services Forum.

With the deadline still a ways away, markets did not ebb and flow with each new phase out of Washington. 

“Investors have become really conditioned to expect that Washington will go through this political drama and will settle things at the end of the day,” said Brian Gardner, senior vice president at Keefe, Bruyette & Woods.

But putting the debt limit to bed did contribute to a strong stock market run. Major indices closed the week with their strongest gains of the year.

The only real drama to the debt-ceiling hike came after the House passed the bill, as Senate Republicans initially struggled to muster the handful of votes needed to clear it.

But that logjam broke after Senate Minority Leader Mitch McConnell (R-Ky.), and his top deputy, Sen. John Cornyn (R-Texas) agreed to back the deal during a dramatic floor vote, bringing several more GOP votes with them.Though the past debt limit fights always ended with Congress averting a possible default, business groups argued the uncertainty and turmoil hurt the economy. In August 2011, the standoff resulted in the first-ever downgrade of the U.S. credit rating.

Business this week hailed Washington for getting out of the economy’s way.

“The Chamber is pleased that both the House and the Senate raised the debt limit in a timely manner to avoid any question of a threat of government default, to allow credit markets to function properly, and to allow the economy finally to achieve some long-awaited momentum,” said Blair Latoff Holmes, spokeswoman for the U.S. Chamber of Commerce.

Businesses have good reason to breathe easy.

The new deal suspends the borrowing limit until March 15 of next year – well after the midterm election. And even after the cap again takes effect on that date, it’s likely the Treasury Department will be able to push the deadline for action into the summer as it deploys its extraordinary measures.

That gives Wall Street and Washington a nice reprieve from debt limit drama, though no one is working under the assumption that the issue has been put to bed entirely.

Those groups recognize that policymakers still need to come up with a plan to address the nation’s looming debt and deficit woes, as the nation’s population ages and health care costs balloon. And they know that the debt limit could again be used to drag that debate to the forefront.

“There’s a long history in which Washington has made policy changes on top of the debt limit, so I think we can go back to that,” said Gardner.

"For those who say we can’t let the focus on our debt go away and we can’t forget the challenge and the long-term issues facing our nation, we’re very sympathetic to that as well,” added Nichols.

Republicans are eyeing a takeover of the Senate in 2014, and it’s hard to imagine a situation where the GOP could control both chambers of Congress and not push the White House for concessions on the debt limit.

And even if Republicans fall short of taking the Senate, many believe this relatively calm round of debt limit debate is more an election-year truce than a sign of things to come.

“In Washington, there is no end to the brinksmanship,” said Sen. Mike Johanns (R-Neb.), a retiring senator who backed the debt limit deal.

“I think political practicality won the day,” agreed Gardner.