Posted on 05/12/2008 8:13:30 PM PDT by doug from upland
Professor Martin Gross had the story nailed in 1994 with THE GREAT WHITEWATER FIASCO. It is a shame that Americans didn't get it and investigators and prosecutors didn't do their jobs.
I spoke with Gross when the book was released. It is amazing how the Clintons, with Hillary's orchestration, got away with the crimes. Yes, it was very convenient for Vince and McDougal to die. McDougal was the last remaining witness who could have done them harm. Denying heart medication in prison was the obvious move for the Clinton crime syndicate.
Here is a repost. Hopefully, this is a little easier to read. This time, page 115 is included.
By 1985, it was obvious to anyone within financial smelling distance of the Madison Guaranty Savings and Loan in Little Rock that it should be closed shut, tight Everyone, it seems except Whitewater partners McDougal, Bill and Hillary Clinton, and those beholden to them, politically and economically.
That adventure in money politics—delaying the inevitable demise of Madison—ended up costing taxpayers millions of dollars each month, all part of the final loss of the S&L. Most recently, a spokesman at the Resolution Trust Company in Washington, when interviewed, estimated that loss at an unhealthy $68 million—$21 million more than previously.
The White House washes its hands of the whole affair, denying ay involvement by the Clintons in Madison Guaranty, and thus Whitewater. But it’s best for the public to understand the full scenario, then make their own decision.
It began in 1984, when it appeared to federal investigators that Madison Guaranty was getting shaky, suffering from too many risky loans, especially for flamboyant real estate deals.
Madison Guaranty was a state-chartered savings and loan and thus regulated by the Arkansas Securities Department. (Only regular banks were handled by the Banking Department.) But since its depositors were insured up to the $100,000 each by the FDIC, the federal government had as much—ormore—to say about its operation. The oversight group, the Federal Home Loan Bank Board (FHLBB) out of Dallas, became concerned about Madison’s health, especially when they keyed into problem loans and potential conflicts. Especially loans to insiders. One that concerned examiners was a $45,000 loan to a top officer of the S&L.
A RED FLAG
The Dallas FHLBB office scheduled a “Special Limited Examination,” as they called it, and put up the federal red flag. The “viability of the institutions is jeopardized,” the feds said after the examination. They found “unsafe and unsound lending practices,” including a host of insider loans. Madison had losses in shaky real estate projects, had paid too much for land, and their reserves were dangerously low.
After a meeting in Dallas on June 21, 1984, the then-chief of the Arkansas Securities Department, Lee Thalheimer, reportedly called the situation “very serious.”
One of its investments, for example, was for a resort on Campobello Island in Canada, near Maine. The island was made famous as the summer resort of Franklin Delano Roosevelt, who contracted polio there. McDougal and his partners spent almost $4 million for the resort, which was so isolated that it was three and a half hours by car from the nearest airport. The investment went sour. But out of the bank board’s examination came only a slap on the wrist—if with a threat of future action. Madison was issued a “Supervisory Agreement,” which was a reprimand with a promise to do better.
But there was an implied threat in the mild rebuke: the bank had to raise more reserves and watch its lending habits if it didn’t want to be closed down, as had been happening with so many Arkansas S&Ls. From 1975, when Arkansas had fifteen state-chartered S&Ls, the number has dwindled to three.
Bill Clinton (and ostensibly Hillary) should not have been surprised. He had an early warning in 1983 from the banking chief, Marlin D. Jackson, an old friend and political aide, who informed the governor that McDougal’s outfit was issuing a host of bad loans. But both warnings were unheeded by the Governor. The S&L was permitted to stay open, and the losses—finally to the taxpayers—continued.
TURN TO ROSE
The Madison Guaranty went into a protective stance. It authorized a study by an accounting firm, Frost and Company, which strangely showed the bank as being solvent.
Then it turned to its legal guns, the Rose Firm, which had been paid Hillary’s $2,000 a month retainer by McDougal for just such an emergency.
Almost immediately after his inauguration in January 1985, Governor Clinton replaced his Securities Department chief, Lee Thalheimer—who had been appointed by the Republican governor Frank White—with a friend, Beverly Bassett. Ms. Bassett came from a law firm that had worked for Madison Guaranty. She was also the sister of Clinton’s campaign chief in Washington County.
The Rose Law Firm outlined a strategy to keep Madison going, and even to expand it. It was a unique plan to raise capital by selling preferred stock in the falling operation. Not only that, but Rose petitioned the Arkansas Securities Department to permit Madison to start a stock brokerage subsidiary.
An assistant of Hillary’s worked on the case, and wrote Ms. Bassett at least two letters on behalf of Madison Guaranty. One was quite optimistic—for no reason—and noted that “the applicant anticipates that no deficiency will exist in the near future.”
The next month, the Rose lawyer was even more upbeat. The second letter to the Arkansas Securities Department said that Madison “anticipates improvement of its financial conditions and services provided to its customers.” (Later, the attorney said he was just passing on what Madison had told him.) The letter to Ms. Bassett was signed “Rose Law Firm.”
CHECK IT WITH HILLARY
But the woman who the White House later swore was not involved had her name plainly printed on the letter. The rose letter stated that if the Securities Department wanted more information they should get back to Hillary Rodham Clinton or her assistant.<> Let’s put this in simple perspective, so far:
1. Madison Guaranty was considered shaky by the federal government, which had warned it to change its ways if it wanted to stay open.
2. Clinton’s own banking chief had warned that Madison was making bad loans. Clinton did nothing.
3. Madison needed more capital to keep going. It also had to get the Arkansas Securities Department to be cooperative.
4. The Rose Law Firm was already on retainer from McDougal through a $2,000-a-month fee arranged by Governor Clinton for his wife, Hillary.
5. Right after his inauguration in January 1985 for a third term, Bill Clinton replaced the head of the Securities Department.
6. The new appointment, Beverly Bassett, had been an attorney at a firm that worked for McDougal, setting up a potential conflict of interest.
7. Then, an attorney at Rose who worked with Hillary, sent in a plan to Ms. Bassett (now Mrs. Beverly Bassett Schaffer), asking for permission to raise capital through preferred stock, and to open a brokerage operation.
8. Hillary Clinton, who supposedly wasn’t involved, had her name plainly advertised on Rose’s submission—only the first clue to her real role, which was probably managing the whole operation.
What happened as a result? Ms. Bassett quickly approved the plan, despite its basic impracticality, as we shall see. It was a simple, conflicted deal. The plan had been agreed to by an official just appointed by the Governor, and pled for by the law firm of which the Governor’s wife was a partner. And on behalf of a man who was the business colleague of both of them in Whitewater. Amazing!
Not everyone was happy with the result. The head of the professional staff handling financial oversight, Charles Handley, originally disagreed with the decision, but when he was overruled, he joined the team.
What about Lee Thalheimer, the previous head of the Securities Department? What did he think of the lenient attitude the state was taking toward Madison? “I really don’t know what I would have done,” Thalheimer, an attorney who now represents the present governor, Jim Guy Tucker, said when interviewed. “I wasn’t there at the time that Madison asked the Securities Department for permission to sell more stock. But I suppose I could be criticized as well. I’m the one who approved the Campobello investment.”
ZONE OF FEAR
Ms. Bassett has several times denied that she gave Hillary and Rose any special treatment, but what would we expect her to say? She should not have been put into the position of having to respond to both her boss, the Governor, and his wife—who were partners of the owner of Madison Guaranty.
The great fiction of the whole operation was that Hillary was not involved. Naturally, that would be a great embarrassment—pleading for a client who was also her business partner in Whitewater before a state agency head appointed by her husband, probably with her aid. To escape such criticism, the Clintons, their friends, then late the White House, developed a whole hands-off theory. Not only wasn’t Hillary involved in the preferred stock deal, they said, but she had nothing at all to do with Madison’s failing operation and its loss to taxpayers. Strictly remote.
Nonsense. It turned out that it was more a ploy than a theory, a charming political fairy tale. That exposure was accomplished by a series of memos uncovered by the Resolution Trust Corporation, which took over what remained of the Madison Guaranty’s assets when it was finally closed.
The first memo showed Hillary’s strong intervention on behalf of Madison Guaranty with her own boss. Rose had billed Madison a significant amount and McDougal had refused to pay. Giroir, then managing partner of Rose, decided he wanted to throw the Madison account out. It was too much trouble and provided too little legal income. However, Hillary quickly mediated between the two men. On October 13, 1983, Giroir sent McDougal a new, smaller, bill along with a notation: “Pursuant to your discussions with Hillary Rodham Clinton.”
In April of 1994, Mrs. Clinton tried to distance herself from the Madison project by saying that when Rose appealed to state authorities, she was only “the billing lawyer,” as if that was nothing. An associate, she says, did the real work. Supposedly, she had no contact with the state agency head named by her husband.
Again, nonsense. The reality is that the letter from the Arkansas Securities Department granting approval for the speculative refinancing was addressed not to the Rose Law Firm, but simply: “Dear Hillary.”
MEETING WITH HILLARY
Perhaps the most incriminating memo, tying Hillary directly in, was written by McDougal himself on July 11, 1985. It was addressed to John Latham, then the chairman of his Madison Guaranty. In it, McDougal talks about the influence he expects Hillary Clinton to exercise on his behalf:
“I need to know everything you have pending before the Securities Commission (of Arkansas),” wrote McDougal, “as I intend to get with Hillary Clinton within the next few days.”
Another fiction is that people like Hillary and McDougal had no input into who was chose at state regulator. McDougal has bragged that he recommended Beverly Bassett in the first place to Clinton—that it was “to his advantage.” That’s been denied by the Clintons. However, a prior memo showed that in matters of choosing oversight people, McDougal had considerable power with the Governor.
On February 7, 1985, McDougal sent the following memo, addressed to “Governor Bill Clinton,” It reads in part: “Kathy called yesterday to ask for my recommendations for two people to fill the vacancies on the State Savings and Loan Board. For the industry position for the 2nd Congressional District, I recommend John Latham, who is chairman of the board of Madison Guaranty and Loan” he wrote, then added that “he is a major contributor to your campaign.” The other was for another S&L man McDougal wanted. Both his recommendations were taken.
FAILED PLAN
But even if McDougal and Hillary has paved the way for the unprecedented preferred stock plan for Madison, it never got off the ground. It’s probable that Madison’s condition would have shown up in the disclosure document (“Red Herring”) and no one would have bought the stock. Meanwhile, the state government, with the help of Hillary, had agreed to a plan to save Madison, at least for the time being.
What did Bill Clinton, the man ultimately responsible for the S&Ls safety, know about all this? Probably everything.
A top professional in the Arkansas Securities Department, Charles Handley, now the assistant commissioner, points out that the red flag on Madison was up, if anybody wanted to look at it.
“We were worried about Madison Guaranty’s financial condition as far back as 1983, when the S&L already had a weak net worth.” Handley pointed out when interviewed, “The federal government had done an examination that year and I agreed with it. I also concurred with the 1984 examination which showed that Madison had a net worth of only 1 percent of total assets. The benchmark was a 3 percent, which wasn’t very high itself.”
Handley expressed his opinion, but no one listened. No one in authority, neither the Governor, Hillary, or the regulators did anything to close, or inhibit the operations of Madison. They permitted the S&L to stay open—even tried to find ways to keep it open—putting the Clintons deeper into the morass of money politics, while Madison Guaranty devoured millions of the taxpayers’ money.
McDougal was temporarily stymied, but he didn’t give up. A more formal Home Loan Bank Board examination was scheduled for 1986, less than a year later. When the preferred stock plan failed, McDougal needed additional somewhat heavy man his age. His name was Judge David Hale, the”judge” being a title granted him by Bill Clinton.
Hale was a member of what McDougal called “the political family.” A former head of the Young Democrats of Arkansas, Hale had been named by Clinton as a judge of a new municipal court in Little Rock, which became the busiest in the state. In addition to his official duties, which paid $59,000 a year, Hale had gone into business—with the U.S. Government. His company, Capital-Management Services, Inc., was the state’s only SBIC (Small Business Investment Company), a firm dedicated to lending money to minorities and the disadvantaged. But Hale didn’t quite see it that way. The government didn’t check on his activities, and instead of granting loans to minorities and the poor, as Congress had planned, most of the loans went to Caucasians with college educations making at least $40,000 a year.
This should be better.
That’s great, nice job on the text transcript.
It looks like your transcript ends late on page 116.
It got onto another topic — the SBA loan.
HERE’S THE LAST FEW SENTENCES:
The state was sprinkled with millions lent out by Hale, and McDougal saw in the federal moneylender a possibility for survival. (The loans were easier made than others because they were guaranteeed and subsidized by the Small Business Administration, one of the most wasteful agencies of the U.S. government.)
“McDougal told me he wanted to vclean up some problem loans with our friends ‘political family,’” Hale said. He was speaking of loans made to leading politicians by McDougal, which were making the books look bad for the upcoming FHLBB examination.
bump for later read
ping
Thanks Doug...
Understanding the crimes of Bill and Hillary Clinton ping to the others...
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