Out of the Box: An Article of Impeachment

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An Article of Impeachment

If you listen to some of the disjointed babblers, in the Press, you will not have a correct understanding of the Impeachment process. Given what is going on currently, as a matter of law, and not political jawboning, I think it is quite important for investors to have a rational understanding of the “Articles of Impeachment,” and just how Impeachment gets carried out, under the Constitution. “Polinomics,” my new word, will soon be front and center for the markets’ behavior, in my view, and so I am taking this opportunity to present the facts to all of you.

The U.S. Constitution provides Impeachment as the method for removing the President, Vice-President, federal judges, and other federal officials from office. The impeachment process begins in the House of Representatives and follows these steps:

The House Judiciary Committee holds hearings and, if necessary, prepares “Articles of Impeachment.” These are the charges against the official.

If a majority of the committee votes to approve the Articles, the whole House debates and votes on them.

If a majority of the House votes to impeach the official, on any Article, and there can be several of them, then the official must then stand trial in the Senate.

For the official to be removed from office, two-thirds of the Senate must vote to convict the official. Upon conviction, the official is automatically removed from office and, if the Senate so decides, may be forbidden from holding governmental office again. Please make note of the number here, it is “two-thirds of the Senate,” which is quite a wall to climb under almost all circumstances and given the construction of the Senate currently, an almost impossible wall to climb, in my estimation.

Also, the impeachment process is political and not criminal. Congress has no power to impose criminal penalties on impeached officials. The ultimate penalty, in the Senate trial, is “removal from office.”

The Constitution sets specific grounds for impeachment. They are “treason, bribery, and other high crimes and misdemeanors.” To be impeached and removed from office, the House, and then the Senate, must find that the official committed one of the following acts.

The first is Treason. The Constitution defines Treason in Article 3, Section 3, Clause 1:

“Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort. No Person shall be convicted of Treason unless on the Testimony of two Witnesses to the same overt Act, or on Confession in open Court.”

“Bribery,” is the next impeachable act. The Constitution does not define bribery. However common law states that it takes place when a person gives an official money, or gifts, to influence the official’s behavior in office.

In all the Articles of Impeachment, historically, no official has been charged with Treason. Two officials have been charged with bribery. The remaining charges against all the other officials fall under the quite complicated, and misunderstood, category of “High Crimes and Misdemeanors.”

To better understand the meaning of the “High Crimes and Misdemeanors,” it’s important to examine how the framers of the Constitution came to adopt it. To achieve balance, the authors of the Constitution, divided the powers of the government into three branches which are the executive branch, the legislative branch, and the judicial branch. This is known, in the American Constitution, as the “Separation of Powers.” They also provided methodologies to check the power of one branch of government by another branch of government. This complex system is known as “Checks and Balances.”

James Madison of Virginia successfully argued that an election, every four years, did not provide enough of a check on a President who was incapacitated or who abused the power of the office. He contended that “loss of capacity, or corruption . . . might be fatal to the Republic,” if the President could not be removed until the next election.

After the Constitutional Convention, the Constitution had to be ratified by the states. Alexander Hamilton, James Madison, and John Jay wrote a series of essays, known as the Federalist Papers, urging support of the Constitution. In Federalist No. 65, Hamilton explained Impeachment. He defined impeachable offenses as “those offences which proceed from the misconduct of public men, or in other words from the abuse or violation of some public trust. They are of a nature which may with peculiar propriety be denominated political, as they relate chiefly to injuries done immediately to the society itself.”

For the more than 200 years, since the Constitution was adopted, Congress has seriously considered Impeachment only 18 times. Thirteen of these cases involved federal judges. Only three of the 18 impeachment cases have involved a President. These were Andrew Johnson in 1868, Richard Nixon in 1974, and Bill Clinton in 1998. This is American history and now, right or wrong, I take no political position, the United States is once again facing the possibility of another Impeachment process.

What I do take a position on is that just the invocation, of the Articles of Impeachment, is bad for the country and will generally be quite negative for both the bond and equity markets. I think it is quite likely, now, that the House will pass at least one, and likely more, Articles of Impeachment and send them to the Senate for trial. My greatest concern, during both processes, is that some quite damning evidence could come out about not only the President, but about a number of other high ranking officials which could send the markets into a tailspin. Even the Fed could get pulled into this mess, as it tries to follow its mandates and keep the economy on an even keel.

During the House portion, of this process, I am somewhat concerned that some damaging “Stuff” may come out about one person, or another, that could rattle the markets. During the Senate portion, the “trial,” I fully expect some very damaging “Stuff,” to rear its ugly head, and affect the markets. “Risk off” and “Run for the hills,” may come front and center to some investors’ psychology. I offer this warning now, so that you will have the time to prepare for what may be a very challenging environment, as our nation goes into a political siege.

What I generally foresee is “Chaos.” Therefore, “Preservation of Capital” comes first. Then it will be tactical opportunities that will be forthcoming as the cries of anguish resound across the playing field.

“Gird for Battle.”

Mark J. Grant
Chief Global Strategist, Fixed Income
Managing Director
B. Riley FBR Inc. and
B. Riley Wealth Management
U.S. 954-468-2366

Information herein is for general use; is not unbiased/impartial; is current at publication date, subject to change; may be from third parties; and may not be accurate or complete. Opinions are the Author’s, not B. Riley FBR, Inc., or their respective affiliates or subsidiaries. This is not a research report or solicitation or recommendation to buy/sell the subject securities. Investment factors are not fully addressed herein. B. Riley FBR Inc. and their affiliates may have a proprietary position in the subject securities Redistribution/reproduction of this material is prohibited. See additional disclosures at: http://brileyfbr.com/legal/legal_disclosures

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