Don't Know Much About History, Anniversary Edition: Everything You Need to Know About American History but Never Learned (Don't Know Much About®) (87 page)

Alexander Hamilton, who would soon after be dragged publicly through a scandal owing to his own sexual misbehavior, explained this view in the
Federalist Papers
. To Hamilton, an impeachable offense had to be “of a nature which may with peculiar propriety be denominated POLITICAL, as they relate chiefly to injuries done immediately to the society itself.” That was the reason that the 1974 Judiciary Committee rejected an article of impeachment against Richard Nixon for cheating on his personal income taxes. Even so, many impeachment proceedings, and certainly the one brought against Andrew Johnson, were politically motivated. As Gerald Ford said in 1970, as a member of the House, “An impeachable offense is whatever a majority of the House of Representatives considers it to be at a given moment in history.”

On January 7, 1999, the Senate impeachment trial was formally opened by Chief Justice William H. Rehnquist. The Republican majority in the Senate meant that a strict party line vote would bring Clinton’s conviction. Five days later, the Senate voted to acquit President Clinton on both articles of impeachment. On the first count of perjury, ten Republican senators joined the Democrats in a 55–45 vote of not guilty. On the second count of obstruction of justice, five Republicans joined the Democrats for an even 50–50 vote. Clinton was left to serve out his term. On Clinton’s next-to-last day in office, his legal team cut a deal that spared Clinton from criminal charges. He admitted that he had made false statements under oath and surrendered his law license. He also agreed to a payment to Paula Jones, which, had it been agreed to earlier, would have probably prevented the whole Lewinsky affair from becoming public.

After Clinton left office, a final report by Independent Counsel Robert Ray, who succeeded Kenneth Starr, concluded in March 2002 that prosecutors had insufficient evidence to show that either the president or Hillary Rodham Clinton had committed any crimes. However, the report stated, “President Clinton’s offenses had a significant adverse impact on the community, substantially affecting the public’s view of the integrity of our legal systems.” Clinton’s defenders dismissed the report as they had dismissed most of the charges brought against him—the result of a partisan assault on a president deeply despised by many conservative Republicans. The report also marked an end of an era. Congress had allowed the law that created the role of the special prosecutor, a vestige of Watergate days, to lapse.

Did this long-running soap opera affect history? More to the point, did it affect policy? Many of Clinton’s critics argued that the latter was certainly true. Twice during the Lewinsky scandal, Clinton had launched air strikes; once against Iraq, and once against suspected terrorist bases in Sudan and Afghanistan, thought to be the home of a then relatively obscure but very wealthy Saudi who was thought to be funding terrorist activity—Osama bin Laden. Republicans openly questioned these actions as a
Wag the Dog
scenario, so named for an eerily prescient film in which a war is fabricated to improve a president’s fading political standing. After the second American missile attack, which was launched in response to the bombing of two separate American embassies, the Senate majority leader, Republican Trent Lott, stated openly, “Both the timing and the policy are open to question.” Republican representative Gerald Solomon was even more critical. “Never underestimate a desperate president,” he said in a press release. “What option is left for getting impeachment off the front page or maybe even postponed.” (In retrospect, Clinton was later criticized for
not
having attacked bin Laden more aggressively.)

This suspicion about Clinton’s motives carried over into the biggest military undertaking of his two terms, the leadership of a NATO alliance attack on Yugoslavia in March 1999 to stop the “ethnic cleansing” policies against ethnic Albanians in the province of Kosovo. In the wake of the breakup of the Soviet Union, former Eastern European Communist states like Yugoslavia had also come unglued. Some, like Poland and Czechoslovakia, had done so peacefully. But in Yugoslavia, that was not the case. Yugoslavia broke apart, and hostilities ensued among the republics along ethnic and religious lines. Croatia, Slovenia, and Macedonia declared independence in 1991, followed by Bosnia-Herzegovina in 1992. Serbia and Montenegro remained as the Republic of Yugoslavia.

Bitter fighting followed, especially in Bosnia, where Serbs reportedly engaged in “ethnic cleansing” of the Muslim population. A peace plan, the Dayton Accord, was brokered by the United States and signed by Bosnia, Serbia, and Croatia (in December 1995) with NATO responsible for policing its implementation. But in the spring of 1999, led by the United States, NATO conducted bombing strikes aimed at stopping Yugoslavia’s campaign to drive ethnic Albanians out of the Kosovo region. Of this foreign policy decision, journalist Bob Woodward wrote, “When President Clinton led the NATO alliance to attack Yugoslavia to stop the ethnic cleansing in Kosovo, he voiced the right humanitarian motives. Yet there was a careless ad hoc quality to his decision making. The clearest lesson of Vietnam and the Gulf War seemed to have been ignored. When going to war, state clear political objectives and ensure that enough military force is committed to guarantee success. Yet . . . lingering in the background were the unavoidable suggestions that Clinton’s actions were influenced by his need for personal atonement and his political desire to do something big and bold so historians would concentrate less on his impeachment.”

Ultimately, the campaign against Yugoslavia in Kosovo proved largely a success, with American air power practically destroying Yugoslavia’s ability to function. A peace accord was reached in June 1999 under which NATO peacekeeping troops entered Kosovo. President Slobodan Milosevic was ousted after the defeat. Later arrested, he was extradited in 2001 to the Hague, where a UN tribunal tried him for war crimes against humanity. In a landmark verdict, a UN tribunal had found Bosnian general Radislav Krstic guilty of genocide in August 2001 for his role in the mass killing of more than 5,000 Muslims in 1995.

Perhaps time and some future memoir will shed more light on the question of Clinton’s legacy and the role his impeachment will play in it. Until then, journalist Jeffrey Toobin’s assessment in
A Vast Conspiracy
seems appropriate. “To be sure he will be remembered as the target of an unwise and unfair impeachment proceeding. But just as certainly, history will haunt Clinton for his own role in this political apocalypse, and for that, despite his best efforts, this president can blame only himself.”

Must Read:
A Vast Conspiracy: The Real Story of the Sex Scandal That Nearly Brought Down a President
by Jeffrey Toobin.

AMERICAN VOICES:

FEDERAL RESERVE CHAIRMAN ALAN GREENSPAN
in testimony before the Senate Banking Committee (February 26, 1997):

Caution seems especially warranted with regard to the sharp rise in equity prices during the last two years. These gains have obviously raised questions of sustainability.

From the beginning of 1995 to the time Greenspan spoke, the Dow Jones Industrial Average had increased 80 percent.

What is “irrational exuberance”?

He saved the world at least three or four times. He cost George Bush I his reelection in 1992. He made everybody in America rich by causing the markets to soar. When he used the phrase “irrational exuberance” to describe a stock market that he feared might be too high in 1996, he sent tremors through the global economy. He caused a recession and crashed the market in 2001. He can jump tall buildings in a single bound. He is not a bird or a plane. He is the chairman of the Federal Reserve.

Who is Alan Greenspan, the “Fed chairman”? And how did he get to be the most powerful man in the world?

Until fairly recent times, few Americans ever heard of the Federal Reserve Board or cared who its chairman was. But in the person of Alan Greenspan, the Fed chairman became one of the most powerful people in the world. By the mid-1990s, his every pronouncement and television appearance was watched with the same reverence once given the Delphic oracle in ancient Greece. One financial news network even created a “briefcase index,” a humorous attempt to determine if the thickness of the chairman’s attaché case might provide some clue to the actions he was about to take—actions that could make or break fortunes and entire national economies with a word. While “Greenspan watching” became a national pastime during the 1990s, many people had a very basic question: Who was this man and what did he actually do?

The Federal Reserve Board, or the Fed, was created as the central bank of the United States in 1913 with passage of the Federal Reserve Act. An independent government regulatory agency, the Fed is supposed to preserve and protect a flexible but stable economy. To do that, it has power over the nation’s currency and conducts the nation’s monetary policy (simply put, the actions taken to influence how much money is theoretically in the economy at a given time, also known as the money supply). It also regulates banks. Since 1913, the act has been modified, and in 1978, the Full Employment and Balanced Growth Act instructed the Federal Reserve to seek stable prices—in other words, to fight inflation—and maximum sustainable growth for the economy, while also seeking to maximize employment.

And there’s the rub, as they say. Economics (also known for good reason as “the dismal science”) traditionally holds that growth is good, but too much growth is not good. An economy that is growing too fast will inevitably lead to inflation—which in its simplest terms is too much money chasing too few goods, or demand outstripping supply. Job growth is also good, but too much job growth is not; in theory, when too many people work, labor costs rise and lead to inflation. In the classic economic textbook view, a certain amount of unemployment is necessary, even desirable, because it limits rising labor costs and dampens consumer demand, helping to keep prices in check. Until the economic boom of the mid-1990s, economic orthodoxy said that the unemployment rate could not fall below 6 percent without provoking dangerous levels of inflation.

What, then, is “sustainable” growth? And what is “maximum employment”? These are two of the key questions that the Federal Reserve has to wrestle with in setting its policies—policies that can ultimately determine the cost of a home mortgage or car loan, the profits that support corporate survival and the stock market, or even, potentially, who is the next president.

Officially, the Federal Reserve system includes the board of governors in Washington, D.C., and the twelve district Federal Reserve banks and their outlying branches. The seven governors of the Federal Reserve system are nominated by the president and confirmed by the Senate to serve fourteen-year terms, nearly lifetime appointments that are supposed to guarantee that short-term political considerations will not enter into the Fed’s deliberations and decision making. But like the Supreme Court, the Fed is keenly aware of which way the political winds are blowing. The chairman and the vice chairman of the board of governors are named by the president and confirmed by the Senate. They serve a term of four years, with no limit on the number of terms they may serve. (Greenspan was appointed to his fourth term in 2000. He retired in 2006 and was replaced by Ben Bernanke.)

There are twelve reserve banks, in Atlanta, Boston, Chicago, Cleveland, Dallas, Minneapolis, Kansas City, New York, Philadelphia, Richmond, St. Louis, and San Francisco. These banks oversee the banking industry, regulate the coin and paper currency in circulation, clear the majority of all banks’ paper checks, and facilitate wire transfers of payments.

Why the Federal Reserve Matters: A Glossary of Financial Terms and “Fedspeak”

Board of Governors:
The board of governors of the Federal Reserve system is made up of seven governors, each appointed by the president and confirmed by the Senate, to fourteen-year terms. The chairman is a member of the board of governors, and his position as head of the Federal Reserve is based on a separate four-year appointment by the president. The board controls the discount rate (see p. 560), and each member of the board is a member of the Federal Open Market Committee (see p. 561).

Bonds, Bills, and Notes:
A bond is a note or obligation requiring the borrower—usually a government or corporation—to pay the lender—an individual or institutional investor—the amount of the loan (“face value”) at the end of a fixed period of time. It is one of the chief ways that governments and businesses raise cash to stay in business. Government and corporate bonds trade in an open bond market, and the prices of bonds move in the opposite direction of interest rates.

The United States Treasury issues several types of securities:
Treasury bonds
usually have maturities of between ten and thirty years, although thirty-year bonds were discontinued;
Treasury notes
are securities with a maturity of more than one year but less than ten years; and
Treasury bills
are securities with maturities ranging from thirteen weeks to one year. Together, these Treasury-issued securities are generally referred to as
bonds
and are considered safe investments with little or no risk to principal (the original investment). Corporations also issue bonds, which generally offer higher interest returns but higher degrees of risk. There are many types of corporate bonds, and they are rated in terms of their risk. The riskiest bonds, which usually offer the lowest credit quality but the highest potential returns, are also known as
junk bonds
.

Budget Deficit/Surplus:
When the government budgets more spending annually than it takes in taxes, tariffs, and other fees it collects, the shortfall is a
deficit
. Accumulated deficits make up the
national debt
. Large deficits tend to lead to higher interest rates, as the government competes for capital with private business and consumers. But some economists hold that deficit spending is necessary, often to stimulate the economy and create jobs, or in a crisis such as a war. A
surplus
is created when the government takes in more than it spends. The surplus can then be saved against future budget expenses, used to reduce the debt, or returned to taxpayers in the form of tax cuts.