What's the difference between Bill Clinton and the Titanic? This question was circulating on Wall Street dealers' trading screens last week within minutes of the news that the president had been accused of obstructing justice, in potentially the nation's biggest scandal since Watergate.
Regrettably the answer to this, and the many other jokes that have followed, is unprintable here. It might seem fair to deduce that Wall Street does not take the latest scandal very seriously.
But this would only be partly true. Dealers are not sentimental people, and they do not feel too sympathetic. But events since have revealed that when it comes to the bottom line, the president has some healthy support in the markets.
Mr Clinton's presidency has been kind to the economy and the US markets, and there are ample reasons to fear any danger to him. By the end of last week, the bond market seemed to have given up most of its gains of the last three months. The yield on the 30-year treasury bond moved from its historic low of 5.73 per cent at the beginning of the week to 5.96 per cent by the end of it.
Most dealers were not terribly worried by the notion of a swift Clinton resignation. It would cause a brief shock to the dollar, but vice-president Al Gore's policies are identical in all the respects that matter to Wall Street. The frightening scenario would be Mr Clinton battling on for months or years in a critically weakened state. Uncertainty in any form is bad for the markets.
Trade poses the greatest fear. Mr Clinton has put his weight behind the IMF's attempt to bail out stricken south-east Asian economies, a cause which Wall Street supports. There are Republicans in Congress who are backing legislation to abolish the IMF, and they have possible support from protectionist elements in the Democratic party.
On the budget, too, there is reason to worry. Under Mr Clinton, the federal deficit has been reduced sharply exactly the opposite of what happened under the conservatives' hero, Ronald Reagan. Now that a government surplus is in sight for the first time in almost three decades, the forces for increased spending on the left, and tax cuts on the right, are growing. Wall Street prefers the Clinton proposal, unveiled in his State of the Union address, to put any surplus towards mending social security a solution which in effect means neither spending it nor giving it back.
Some individual stocks have also suffered in the backlash of the crisis, led by the tobacco giant Philip Morris. With a weakened president, the chances of a global out-of-court settlement for the tobacco industry would recede.
In its first few hectic days, the crisis dominated the market, briefly eclipsing even the Asian currency crisis and the corporate earnings results. Then bonds and the dollar bounced once the president made a strong and convincing denial which left him in much better health than his previously unconvincing and evasive ones. His well received State of the Union address buoyed the markets further, and the 30-year bond yield then recovered to 5.83 per cent.
Will President Clinton survive? Market history provides a clue. Watergate crippled the Nixon administration from the moment in March 1973 when some of the burglars hired by the White House agreed to tell what they knew, until the presidential resignation in August 1974.
This 18-month period of uncertainty coincided with the worst performance for the US economy and financial market since the war. Bludgeoned by both Watergate and oil-price shocks from the Middle East, Wall Street settled into the worst bear market since 1929.
The situation hardened public dislike of Nixon, while his political weakness made it harder for him to take action. The "Stagflation" of the early 1970s seems to be in a different world from the "Goldilocks Economy" of the late 1990s.
Not all of this can be attributed to Mr Clinton. History will probably give most of the credit to Fed chairman, Mr Alan Greenspan. But the economic record since Mr Clinton took office in January 1993 makes it impossible to say that he has done much wrong. This gives him a huge advantage compared to Nixon in his drive to save his job.
