Federal Government Shuts Down

Congress was unable to agree on legislation authorizing money for the continued operations of the federal government by midnight on Monday and, as has been expected for some days now, a shutdown began today, the beginning of the government’s fiscal year.

Congress was unable to agree on legislation authorizing money for the continued operations of the federal government by midnight on Monday and, as has been expected for some days now, a shutdown began today, the beginning of the government’s fiscal year. The last time the federal government shut down was in 1996, and the shut down lasted 21 days.

If the shutdown is short, the impact on the economy is likely to be minor. The immediate impact will be the furloughing of certain federal employees (an estimated 800,000 workers), delays in the processing by some federal agencies (such as passport applications), and the closure of non-essential federal operations—things are going to be lonely on Tuesday in national parks and at the Smithsonian in D.C., for instance.

As of Monday night, the two houses of Congress hadn’t agreed even on the conditions of a conference to end the stalemate. The Senate wanted a short (perhaps two-month) continuing resolution on spending to be passed before the conference, while the House wasn’t keen on the idea.

The shutdown is also likely to affect the publication of certain economic indicators in the near future, most notably the monthly report by the Bureau of Labor Statistics on the employment situation. Normally that report comes out on the first Friday of the month. A report on construction spending is due from the government on Tuesday, which may or may not be released since it has been prepared in the days leading up to the shutdown.

Fannie Mae: Serious delinquencies down

Fannie Mae reported on Monday that the single-family serious delinquency rate for mortgages it owns or controls declined from 2.7 percent in July in August to 2.61 percent. That’s the lowest level since December 2008, and a considerable drop since a year ago, when the rate was 3.44 percent.

Like its sister GSE Freddie Mac, which reported its serious delinquency rate last week, the Fannie Mae rate has been slowly creeping down since a peak in early 2010, when it was 5.59 percent. At the current rate of decline, the rate will be approaching a more historic “normal” of around 1 percent in two years or so. According to both Fannie Mae and Freddie Mac, seriously delinquent mortgage are those “three monthly payments or more past due or in foreclosure.”

Wall Street reacted to the prospect of a government shutdown on Monday by dropping, but not precipitously (stocks were temporarily down more during the recent Syrian war scare, for instance). The Dow Jones Industrial Average lost 128.57 points, or 0.84 percent, while the S&P 500 and the Nasdaq were down 0.6 percent and 0.37 percent, respectively.