After four years of tireless investigation, 41 hearings by two separate congressional committees, and the expenditure of $30 million in taxpayer funds, this much is clear: Whitewater is the all-too-typical story of a felonious savings and loan owner (James McDougal) with friends (Bill and Hillary Clinton, as well as recently convicted Arkansas Gov. Jim Guy Tucker) in high places.
The Clintons' involvement with McDougal was as follows: In 1978, the Clintons, in partnership with McDougal and his savings and loan, Madison Guaranty, invested $69,000 in a real estate development called Whitewater. When the project fell into debt, McDougal paid back the creditors (apparently without the Clinton's knowledge) with what seem to have been federally insured deposits. At the same time, Madison was renting office space to at least one Arkansas state agency, and McDougal was using Madison to make possibly illegal contributions to Clinton's gubernatorial campaigns. Finally, when McDougal sought permission from the state banking commission to issue preferred stock in order to keep his thrift afloat, he was represented by the Rose Law Firm, and Hillary Clinton was one of the attorneys of record. When Madison failed in 1989, it cost taxpayers approximately $69 million in federally insured funds. (The Clinton's imprudent investment, however, had nothing to do with Madison's failure.)
The Clintons' relationship with McDougal undoubtedly reeks of conflict of interest and suggests extremely poor judgment on their part. But it is far from unique. Whitewater bears a startling resemblance to innumerable other S&L-related episodes, including at least three involving prominent Republicans: Sen. Phil Gramm of Texas, Gov. Fife Symington of Arizona, and Rep. Henry Hyde of Illinois, chair of the House Judiciary Committee. The S&L catastrophe was, after all, primarily a Republican disaster, propelled by the same lunatic economic thinking that is once again dangerously in vogue on the GOP side of the aisle.
Why isn't anyone talking about Gramm or Symington or Hyde? Because Whitewater is driven by political rather than legal concerns. In 1994, I got caught up in the furor over Whitewater when the GOP attack machine seized upon an article I had written for the New Republic about Arkansas cronyism. My article was not flattering to Gov. Clinton, and even less so to the since-convicted Webster Hubbell, but conservative anti-Clinton forces wildly misrepresented my findings. The Wall Street Journal editorial page, for example, held the article up as definitive proof that Clinton sat at the center of a felonious cabal. I found myself, for a time, an unwilling poster boy of the hard right.
Despite the obvious bias of the congressional Whitewater investigation, the media continues to follow its lead. If reporters honestly believe Whitewater merits such attention, then they should look into the cases in the adjacent column.
At a time when the GOP is making Whitewater a centerpiece of its election strategy, the S&L-related misadventures of Gramm, Symington, and especially Hyde could enable the Democrats to launch a counterattack into the heart of the enemy camp. But to bring up these scandals would mean revisiting the S&L catastrophe, a tomb of secrets nobody--on either side of the political aisle--wants to open.
So the Clintons are left to twist in the wind, with the ruins of a corrupt S&L looming in the background. Many states had such ruins, often in uncomfortable proximity to a prominent politician. If reporters bothered to look, they'd find the same story replayed across the land.
L.J. Davis is a contributing writer to Mother Jones.
Henry Hyde, in addition to chairing the House Judiciary Committee, heads the platform committee for the GOP convention. He is also the only congressman being sued by government bank regulators.
Beginning in 1981, Hyde, a former member of the House Banking Committee, sat on the board of directors of Clyde Federal, a smallish Chicago thrift that later failed because of foolish investments in real estate and the futures market, costing taxpayers $67 million. The government has sued Hyde and 11 other former directors and officers of Clyde Federal for gross negligence amounting to $17.2 million.
In an interview with In These Times, Hyde portrays himself as a somewhat inactive director; in fact, Clyde's boardroom minutes reveal Hyde seconded the motion that launched Clyde into its disastrous futures trading. Hyde claims Clyde was solvent while he served as a director; in fact, during his tenure, federal regulators repeatedly warned that Clyde was flirting with disaster. Hyde says he left in 1984 after he finally perceived his conflict of interest; in fact, he left just as Clyde was dispatching its lawyer and its auditor to Washington in an attempt to calm down regulators.
Nor did Hyde's work on behalf of America's collapsing thrifts end with Clyde. In 1989, even as the extent of the S&L disaster was growing apparent, Hyde became an outspoken defender of "goodwill" thrifts. In financial parlance, goodwill is the subjective dollar value of a company's "reputation." In reality, it is a legal fiction that cost the nation untold millions, perhaps billions, of dollars. Goodwill was the difference between what an S&L was actually worth and what somebody had paid for it. In other words, if a thrift was in terrible condition but somebody had paid a bundle for it, the thrift was solvent on paper because goodwill was an "asset." As long as a thrift had sufficient goodwill, it could squander as much federally insured money as it could lay its hands on.
Hyde had close ties to one prominent goodwill thrift, Olympic Savings of Berwyn, Illinois. Its directors included the late Rep. Edward Madigan (R-Ill.), a powerful political ally of Hyde's who later became secretary of agriculture under Bush. Moreover, Hyde's son, Henry Jr., managed one of Olympic's branches. When Congress repealed the goodwill rule despite Hyde's best efforts, Olympic was seized by federal court. Its failure cost taxpayers an estimated $111 million.