Fra BNP Paribas:
The public release of a call transcript between Presidents Trump and Zelensky and a US
whistleblower complaint alleging misuse of powers has raised the likelihood of the House voting to impeach President Trump.
Conviction, which requires a two-thirds vote in the Senate, remains unlikely given a 53-47 current Republican majority, absent major developments that would test party allegiances.
At the margin, formal impeachment proceedings dim already low expectations for significant legislation prior to the election, while slightly weakening chances for USMCA passage.
Why now?
On 24 September, Speaker of the House Nancy Pelosi announced that the House would begin an impeachment inquiry into the conduct of the president. Speaker Pelosi had to this point been wary of pursuing impeachment, resisting calls within her caucus calling for it.
Two factors likely caused her to change course: 1) recent revelations of President Trump’s conduct suggesting that he used the power of the presidency for personal gain, and with that 2) a rising number of Democrats in tight (“swing”) districts coming out in favor of impeachment, despite possible political risks given heretofore limited public approval for
impeachment.
On Wednesday 25 September, the White House released a memorandum of the 25 July conversation between President Trump and President Zelensky. The transcript shows President Trump asking President Zelensky “to do us a favor” by investigating American company Crowdstrike and former vicepresident Joseph Biden, and to work with his attorney
general and personal attorney in doing so.
While a quid-pro-quo related to Crowdstrike appears explicit, the transcript did not appear to show an explicit quid-pro-quo involving military aid, although the “do us a favor” followed Mr Zelensky’s mention of such aid.
The SPX rallied about 0.7% on the release and bonds sold off around 4bp on 10s, signaling a market interpretation that the transcript might bolster Mr Trump against the case for impeachment (however, some positive US-China trade-related headlines likely
helped drive such moves). Whistleblower complaint: On Thursday 26 September the whistleblower complaint of a US intelligence official was released. The whistleblower stated that in the course of his/her official duties, he/she “received information from
multiple US government officials that the President of the United States [was] using the power of his office to solicit interference from a foreign country in the 2020
US election.
This interference included, among other things, pressuring a foreign country to investigate one of the president’s main domestic political rivals. The president’s personal lawyer, Mr Rudolph Giuliani, was cited as a central figure in the effort, with Attorney General Barr being implicated as well. Since the release of the transcript, additional Democratic representatives have come out in favor of the impeachment inquiry, and there is now a majority backing it.
The transcript and whistleblower complaint have likely reinforced Speaker Pelosi’s decision to initiate the inquiry, and we see a high chance the inquiry ultimately proceeds to a vote on articles of impeachment on the president.
What now?
A good outline of the impeachment process can be found here. In sum, it takes a simple majority vote of the House (which the Democrats have) to approve an article of impeachment. The Senate would then hold a trial, with conviction requiring two-thirds vote.
