No deal yet on debt crisis. How will Asian markets and Wall Street react?

Washington’s self-imposed deadline to do something credible on the debt crisis before the Asian financial markets opened on Sunday passed in silence, marked only by camera crews vainly chasing rumors up and down the empty stairwells of the Capitol.

Both Speaker John Boehner (R) of Ohio and Treasury Secretary Timothy Geithner have cautioned that Congress needed to act this weekend to reassure markets. But with bipartisan deals off the rails and new partisan plans still in the works, Congress fell short of that goal.

In the Bush years, the reaction from the Asian markets often drove the timing of decisions – from the rescue of AIG and Bear Stearns to the failure to prop up Lehman Brothers in 2008.

“[Treasury Secretary Henry] Paulson always tried to get things done before the Asian markets opened, and Geithner has raised that perspective again,” says Michael Greenberger, a professor at the University of Maryland and former director of trading markets of the Commodity Futures Trading Commission.

“I’m not sure failure to reach agreement today [Sunday] will be a signal for a selloff, but as the week goes on, more and more investors will be concerned,” he adds. “There’s definitely a worry that people are going to want to dump their stocks. There could be extreme turmoil in markets.”

Speaker Boehner spoke with his caucus at 4:30 on Sunday and urged members to stay united. There are no secret negotiations with the White House, nor is it possible to cut a “grand bargain” with this president, he told call participants. Earlier, he told “Fox News Sunday” that if a bipartisan plan is not possible, “I and my Republican colleagues in the House are prepared to move on our own.”

House Republicans have not released details of the new plan, but Boehner said it would involve a two-stage process: a short-term hike in the debt limit with immediate spending cuts, then a second hike with a more robust package of cuts.

“It’s not physically possible to do all of this in one step,” he said.

Meanwhile, Senate majority leader Harry Reid (D) of Nevada is close to unveiling his own plan to find $2.5 trillion in deficit reduction in straight spending cuts. The aim of the Reid plan is to avoid the sticking points that derailed White House debt talks – the tax hikes opposed by Republicans and entitlement cuts opposed by Democrats.

It also meets the GOP demand that any increase in the debt limit be covered by spending cuts in a dollar-for-dollar match and the Democrats’ bottom line to pass a debt limit hike through 2012. President Obama says he will veto any short-term plan that does not raise the debt limit through 2012.

“The markets of the world do not want to watch this show again in six months,” said White House Chief of Staff William Daley on CBS’s “Face the Nation” Sunday.

Mr. Reid and House minority leader Nancy Pelosi (D) of California met with President Obama at the White House on Sunday evening to discuss the plan. Democratic aides say that Reid will not release details of the plan – or reach out to Republicans – until he has briefed Senate Democrats on Monday.

GOP aides say that bipartisan negotiations continued on Sunday at a staff level over the “last choice” option first proposed by Senate Republican leader Mitch McConnell, and subsequently tweaked by Reid.

The McConnell-Reid plan provides a fast-track procedure for the president to raise the debt limit automatically, subject only to a resolution of disapproval from Congress. With a supermajority required to overturn a presidential veto, an increase in the debt limit could pass with the support of only 34 senators.