(23 December 2019)DAILY MARKET BRIEF 2:Impeachment, party switching, marijuana concerns

President Trump is Impeached. On largely partisan lines, the House voted to impeach President Trump on two counts—obstruction of Congress (229-198 vote) and abuse of power (230-197 vote). All but two of the 233 House Democrats supported impeachment on both counts, while a third objected to the obstruction of Congress charge. Congresswoman Tulsi Gabbard (D-HI), a presidential candidate, voted “present.” None of the chamber’s 197 Republicans voted for either count. The impeachment process will now move to the Senate, which will likely begin its trial on January 6. Senate Majority Leader Mitch McConnell (R-KY) and Minority Leader Chuck Schumer (D-NY) have disagreed on how the trial should be structured, but the majority leader’s views likely will prevail.  As such, we still expect a fairly short trial that lasts through January and features no outside witnesses

Party Switching. Congressman Jeff Van Drew (D-NJ) announced his change of party affiliation from Democratic to Republican due in part to his opposition to the impeachment of President Trump. Not many members of the House or Senate switch parties while serving since it puts them in a more politically-perilous situation. Their former party is motivated by revenge to defeat them, while the new party doesn’t always trust them. Since 2000, there have been five members of the House and one senator who have changed their party affiliation to the opposite party, and an additional two senators and one representative who changed their party affiliation to independent. Of this group, only two of the House members who faced an opponent in their primary and general re-elections were re-elected with their new party affiliations.  Party-switching involving current members of Congress is always a big media splash the day it is announced, but it doesn’t usually lead to longer-term political success.

Marijuana Banking Concerns. Although many states have legalized marijuana in some form, businesses in this growing industry face impediments and risks, including an inability to access banking and other financial services, due to conflict between state and federal laws. There has been bipartisan interest in Congress to address this problem with a safe harbor to banks and other financial institutions to serve covered businesses. The bill, called the Secure and Fair Enforcement (SAFE) Banking Act, passed the House in October by a 321-103 vote. In the Senate, Banking Committee Chairman Mike Crapo (R-ID) indicated his interest in having a committee vote on a relevant bill by the end of the year. However, Crapo and other Senate Republicans have concerns about the House-passed bill and this week issued a request for public feedback on those areas of concerns, including public health and safety, legacy cash, money laundering and interstate commerce and banking. Addressing these concerns would require an extensive rewrite of the existing bill and would cover complicated issues well beyond banking and the jurisdiction of the Banking Committee.  Prospects for successful Senate action in this area in the coming year are quickly fading.

By UBS