* China concerned as debt debate intensifies
* Chamber of Commerce to send letter to lawmakers
* Unusually, Republicans at odds with business allies
By Tim Reid and Rachelle Younglai
WASHINGTON, April 20 They have been in
Washington barely four months but the 85 first-term Republicans
in the House of Representatives have found themselves the
target of a massive lobbying campaign by Wall Street banks, big
business and the U.S. Treasury.
The fiscally conservative freshmen are under intense
pressure to vote to raise the cap on U.S. borrowing so that the
United States can continue to pay its bills after May 16. The
Obama administration has expressed confidence that a deal can
be reached with Republicans but Wall Street is less sure.
Yet there are signs the intense lobbying effort is falling
flat. Many freshmen still insist they will not vote to raise
the debt ceiling unless it comes with legislation to slash
America's $1.4 trillion deficit.
This is no ordinary class of rookie Republican lawmakers.
Many are aligned with the loosely organized conservative Tea
Party movement that is devoted to dramatically scaling back
After being elected to Congress from relative obscurity,
they are being lavished with attention and receive almost daily
warnings that a failure to raise the debt limit will trigger a
global economic catastrophe.
There are invitations to meet with Wall Street executives,
coffee mornings with business leaders, calls from the Treasury
Department, visits from economists, and weekly hourlong
meetings with John Boehner, the Republican speaker of the
The lawmakers are reminded frequently in these meetings
about the concerns America's foreign creditors, especially
China, have about the prospect of a U.S default. Chinese
officials in Washington say they are watching the debate
"There is no question about it -- there is a lot of
pressure being put on the freshman," Michael Grimm, a
first-term Republican from New York, told Reuters.
"I have had meetings in D.C., meetings in New York,
meetings with Fortune 500 companies, meetings with financial
institutions," he said. "I get invitations to meet with boards
of directors, or a group of CEOs, from insurance companies, big
banks, community banks, financial institutions, small
"And the message is: not to raise the debt ceiling will
lead to a catastrophic event. I understand that. But if it
doesn't come with serious cuts and real systemic reform, it's
just short-term relief."
CRUCIAL VOTING BLOC
The Republican freshmen are seen as a crucial voting bloc
in the looming battle over whether to allow the U.S to go
deeper into debt to avoid defaulting on its loans.
The lobbying campaign is unusual in that it spans almost
the entire financial and business community -- often natural
allies of the Republicans who now oppose them on the debt
Treasury Secretary Timothy Geithner has said the nation
will hit its current debt limit of $14.3 trillion in mid-May,
and a refusal by Congress to raise it would be "catastrophic."
Geithner already has sent two letters to members of Congress
urging them to back the move.
Economists say a failure to raise the ceiling would trigger
a crisis in bond markets and possibly another recession.
Interest rates would soar and and foreign investors would lose
confidence in America's creditworthiness.
China, the biggest foreign holder of U.S. debt, warned
Washington this week to protect investors in its debt after
Standard & Poor's rating agency threatened to lower the United
States' coveted AAA credit rating.
"The budget issue has international consequences," one
Chinese official in Washington told Reuters. "We are of course
following it," another official said.
HAGGLING OVER COFFEE
The U.S. Chamber of Commerce, which has held dozens of
meetings with Republican freshman on the debt ceiling issue, is
sending a letter to every member of Congress next month urging
them to vote to raise it.
"We have told them we understand it's a tough vote," said
R. Bruce Josten, executive vice president for government
affairs at the Chamber. "But we also tell them this is about
the full faith and credit of the United States and the
consequences of a no vote will be dramatic."
The Financial Services Forum, a financial policy
organization that includes the CEOs of some of Wall Street's
biggest banks such as JPMorgan Chase (JPM.N) and Bank of
America (BAC.N), has focused almost exclusively on the House
FSF officials have held meetings with freshmen and their
staff in their Capitol Hill offices, in the FSF's Washington
office and in "meet and greet" sessions over coffee.
The freshmen are not told how to vote but they are told of
the dire consequences if they do not -- investors will flee,
interest rates will spike, the markets will panic, and higher
interest rates will explode the deficit.
Yet many are standing firm. "I am not going to vote to
raise the debt ceiling if it does not include long-term
structural reform to reduce the deficit," one Republican
(Reporting by Tim Reid and Rachelle Younglai; Editing by
Ross Colvin and Bill Trott)