GREENWICH, Conn. — Wall Street is used to a little chaos in Washington. But the crowd at the two-day Greenwich Economic Forum this week responded to then-Speaker Kevin McCarthy’s ouster, mounting polarization and a (likely) rematch of the explosive 2020 presidential election like a bed of bad oysters. After years of warnings from ratings agencies and analysts, Wall Street’s best and brightest are beginning to weigh the long-term effects of a political ecosystem in which deep partisanship works to the detriment of basic government functions. Three days after Congress temporarily averted a government shutdown, McCarthy’s sudden exit at the hands of a small group of Republicans is shaking the financial sector’s faith in lawmakers’ ability to manage their fiscal obligations. With the economy facing headwinds, the recent turmoil in D.C. is like “dancing on a stage that’s set to collapse,” Christine Todd, the CIO of Arch Capital Group, said in an interview. “I’m just wondering when the bond vigilantes come out and say this is dangerous.” Analysts like Morgan Stanley CIO Mike Wilson posit that the recent spike in 10-year Treasury note yields reflects concerns about Washington’s fiscal discipline. Borrowing costs are poised to keep climbing, which will pinch businesses and consumers. Outside the lobby of the Greenwich Delamar Harbor on Wednesday, former Commerce Secretary and private equity chieftain Wilbur Ross told your host that the thought of paying current rates on a 30-year mortgage “would make my hair stand up” if he still had any. And that doesn’t even take into account how culture wars have widened the divide. The “irreconcilable differences” between red and blue communities on everything from gender to inequality have put the country “at risk of a civil war of sorts,” Bridgewater Associates founder Ray Dalio told the Greenwich crowd. Which brings us to the 2024 election: “There happens to be a man who was president of the United States who had the insurrection of Jan. 6, has had four indictments, 91 counts against him, and his polling is high in the Republican Party,” Carlyle Group co-founder David Rubenstein told a roomful of investors at the Forum. “Can Biden for certain win Georgia again? Virginia? Pennsylvania? Michigan? Wisconsin? Minnesota? Nevada? Arizona? That’s not 100 percent certain. So, I would say — it’s hard to believe — but I do think Trump has a pretty good chance of getting reelected,” the Carter administration alum added. “It’s a sad commentary on our country that we don’t have a lot of younger faces that are rising up.” As for a Rubenstein ’24 campaign? The 74 year-old ruled it out: “I’m too young.” Well then. At least they serve good chicken ballotine at the Delamar. While Rubenstein, Dalio and others made a point to emphasize the economy’s underlying strengths — robust household finances and a solid labor market — the political and fiscal challenges that culminated with the right wing’s revolt against McCarthy might finally serve as a wakeup call to an industry that had become inured to repeated battles in the Beltway. “It was a shock how quickly it happened,” Ted Yarbrough, a former top executive at Citi who’s now the chief investment officer at the alternative investments firm Yieldstreet, told MM. The ensuing rise in yields “was a message to the market that you have to pay attention to what’s happening in Washington.” Some Democratic policymakers are hoping that Wall Street uses whatever levers it has to highlight potential damage to the economy. Hours before Rep. Matt Gaetz (R-Florida) executed his plan to give McCarthy the boot, Connecticut Gov. Ned Lamont told the executives at the conference that they should “put a little pressure” on House members to deliver on a plan to fund the government before the mid-November deadline. Still, as he told MM after his remarks, “I don’t know how much impact you can have on Congressman Gaetz.” IT’S THURSDAY — Seriously, it was a good chicken ballotine. Send tips, gossip and suggestions to Sam at ssutton@politico.com and Zach at zwarmbrodt@politico.com.
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