Markets

Cowen says 'base case' is House impeaches Trump, but Senate clears — 'Bill Clinton 2.0'

Key Points
  • Cowen is now advising clients that a formal accusation by the House of Representatives now seems fated for Trump and sets the stage for "Bill Clinton 2.0."
  • Our base case is that "the House impeaches Trump, though the Senate does not convict," Cowen strategist Chris Krueger writes.
  • "Whatever the path chosen, an impeachment vote now appears to be a question of when, not if - and more than likely by the end of this week," he adds.
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How to impeach the President of the United States

One of Wall Street's top brokerages on Tuesday announced that its base case for President Donald Trump is impeachment.

Cowen Washington policy strategist Chris Krueger advised clients a formal accusation by the House of Representatives now seems fated and sets the stage for what he called "Bill Clinton 2.0."

Our base case is that "the House impeaches Trump, though the Senate does not convict," Krueger wrote. "Pelosi may also create a new Committee to study the Ukraine/Biden/Whistleblower issue."

"But whatever the path chosen, an impeachment vote now appears to be a question of when, not if — and more than likely by the end of this week."

House Speaker Nancy Pelosi is expected to announce a formal impeachment inquiry into President Donald Trump on Tuesday, two sources familiar with the situation tell CNBC. Earlier Tuesday, Pelosi said that Democrats are "ready," when asked whether she and her caucus will take steps toward Trump's impeachment.

"That's why I've said as soon as we have the facts, we're ready. Now we have the facts, we're ready … for later today," Pelosi said at The Atlantic Festival in response to a question about impeachment.

U.S. President Donald Trump walks toward journalists as he departs the White House for a campaign rally in Pennsylvania May 20, 2019 in Washington, DC.
Chip Somodevilla | Getty Images

Her latest gestures toward a formal accusation came as the number of congressional Democrats now open to some type of action on the impeachment of Trump climbed above 160, representing well over half the House caucus.

The record support for an official accusation comes after Trump on Tuesday confirmed he withheld aid to Ukraine over frustrations with European allies.

That confirmation at the United Nations in New York followed multiple reports that Trump asked staff to withhold about $400 million in aid more than a week before a July phone call in which the president pressed his Ukranian counterpart to investigate the son of Democrat presidential hopeful Joe Biden.

Trump denies that he pressured Ukrainian President Volodymyr Zelensky in their call July to investigate the Bidens.

But his personal lawyer, Rudy Giuliani, said Monday he can't be "100%" certain that Donald Trump did not threaten to withhold foreign aid when Trump reportedly urged Ukraine's president to investigate the son of 2020 Democratic frontrunner Joe Biden.

Krueger's mention of President Bill Clinton refers to the House of Representative's decision in 1998 to begin impeachment proceedings against the sitting president. The chamber's vote nearly 21 years ago formally accused Clinton of "high crimes and misdemeanors" including lying under oath and obstruction of justice.

Clinton was later acquitted of the charges against him when the Senate failed to convict him by the necessary two-thirds majority.

The scandal "has upended Washington," Cowen's Krueger added. "The immediate focus for markets should be on what this means for trade and legislation for the remainder of the year."

A formal impeachment by the House could, at the very least, undermine Trump's aggressive trade positioning around the world. Many market economists believe that trade discussions between the U.S. and China have stalled in recent months as the 2020 election approaches, perhaps hopeful that a new president would be more willing to settle.

For his part, Krueger adding that an "all-encompassing" fight with Democrats could pull Trump's attention away from the fragile trade talks and reduces the odds of even a partial deal.

"Perhaps Trump can't/won't engage in the high stakes diplomacy to break the U.S.-China impasse and get/sell a skinny deal," he told clients. "If Trump doesn't go to APEC, the chances of any interim deal this year become very low. In this same vein, we were struck by the extremely hawkish language in Trump's UN speech today - another data point for the argument that an interim deal is less likely, not more."