We noted recently that Wall Street seemed rather blasé as the debt ceiling fight trudged on. But as the deadline for a debt deal nears--August 2 looms--that has changed in a big way. 

Wall Street executives have now joined the battle, and in so doing they have made allies (if only temporarily) of the regulators that are fighting on other fronts. JPMorgan Chase CEO Jamie Dimon, who has had harsh words for Dodd-Frank, has discussed the issue directly with Treasury Secretary Tim Geithner, who assured him that the Treasury and the Fed would do whatever it takes to keep the payment system operating, according to the New York Times.

In addition, top executives of banks have penned letters to the President and Congress to make clear what a catastrophe a debt ceiling impasse would be. One insurance company went so far as to ask all employees to contact their congressional representatives to demand a solution. Even hedge funds are getting in on the act with some lobbying their contact on the Hill. Says the Times: "Not since 2008 have federal officials and bankers been so clearly aligned in their push for the same policies. Back then, the industry and regulators pressed Congress to pass legislation allowing the federal bank bailout at the height of the financial crisis." 

As of Sunday night, a debt deal remained stubbornly elusive. And in some ways, we have already veered into uncharted territory. And we're finally starting to see markets react accordingly. As investors moved to the new safe securities. Short-term securities tanked. Money market mutual funds saw huge inflows. Stocks teetered. Long-term Treasuries-somewhat oddly-soared. Gold prices leaped. The VIX jumped. And so on.

Washington has gotten the message. But that doesn't guarantee a deal, though I maintain we'll see soon, if one hasn't been inked by the time this is posted.- Jim