Clinton Issues Strong Defense of Wife’s Integrity

President Clinton, visibly upset that First Lady Hillary Rodham Clinton has increasingly become a focal point of the Whitewater investigation, issued a passionate defense of her Monday, declaring that “her moral compass is as strong as anybody’s in this country.”

“I have never known a person with a stronger sense of right and wrong in my life--ever,” the President said. “And I do not believe for a moment that she has done anything wrong.

“I could cite you chapter and verse over 20 years--plus now--that I have known her when it would have been very easy for her to take a shortcut, to take an easy way out, to do something else, when she has unfailingly done the right thing.”

The President’s unusual defense of his wife came at a time of rising criticism of the Administration’s handling of Whitewater and increasingly pointed questions about Mrs. Clinton’s personal role in the failed Arkansas real estate development. The questions are casting shadows over a First Lady whose role in the policy and politics of the White House is unprecedented in American history.

The Administration has counted on her as a critical asset in the fight for its No. 1 legislative goal, health care reform, as well as welfare reform and other domestic policy issues. Now, some White House officials and key congressional leaders conceded privately, the intensifying controversy threatens to undermine her leadership and her credibility.

“In Washington, if you’re perceived as strong, you can get things done,” said a senior White House official. “But if you’re perceived as vulnerable, it’s hard to get anything done.”

Mrs. Clinton herself has been “uptight for weeks,” sources said, over the continuing news reports of cover-up, shredded documents, conflicts of interest and other alleged improprieties in connection with the tangled land deal into which she and her husband entered in the 1970s.

She continues to “function OK” at the White House, an official said, adding: “I’d say she’s showing grace under pressure. She’s called a health meeting for tomorrow.”

Some Democrats warned flatly that, unless the President and First Lady can get Whitewater out of the headlines and off the evening news shows, they will lose the already touch-and-go battle for health care reform.

Others, including some leading figures in the congressional debate over health care, insisted that Whitewater has not diminished Mrs. Clinton’s effectiveness. Rep. Henry A. Waxman (D-Los Angeles), chairman of the House Energy and Commerce health and environment subcommittee, said: “The overwhelming majority of the American people side with her on the issue and support her personally.”

Mrs. Clinton dazzled Congress and the public last fall in her highly publicized testimony on behalf of the Administration’s health reform proposal. The White House, believing that she enjoys greater public credibility than anyone else in the Administration, has counted on her to continue in that role.

But now private White House polls show that Mrs. Clinton’s public approval rating has fallen below that of the President, although both have ratings between 55% and 60%. The consensus at the White House seems to be that recent disclosures which resulted in the appointment of special counsel Robert B. Fiske Jr. to investigate Whitewater and the forced resignation of White House counsel Bernard Nussbaum threaten to undermine the First Lady’s efforts.

A week ago, said a senior congressional aide, he would have said that health care reform was not in jeopardy. “I now have to admit it does feel as though there has been a spillover,” he said. “It reached a critical mass toward the end of last week and now it’s having a strategic impact on other things.”

Even if Clinton is right and he and the First Lady have done nothing wrong, said the aide, “what’s wrong about it is that the White House has allowed itself to be overwhelmed by this thing. It doesn’t matter what the thing is. . . . The White House is not in a governing mode, it is in scandal-defense mode. It is not in control of its own work.”

What makes the “Hillary factor” so unpredictable is that no First Lady has ever assumed such an active role, both before and after coming to Washington.

To be sure, conservatives reviled Eleanor Roosevelt in the 1930s and ‘40s for her unstinting campaigns for liberal causes. More recently, Nancy Reagan earned considerable enmity for her efforts, sometimes with resort to astrological charts, to control President Ronald Reagan’s schedule.

But no First Lady had participated in policy-making sessions at the highest levels of the White House. None had served as the leading witness in an Administration’s advocacy of its policies in Congress.

What’s more, no presidential wife had had such an active career before becoming First Lady. Mrs. Clinton was a lawyer in Little Rock, Ark., while her husband served as governor. It is her activities then, when she and her husband formed a real estate partnership with James B. McDougal, the owner of Madison Guaranty Savings & Loan, that are echoing through Washington now.

The President and his wife have described themselves as innocent bystanders as McDougal drove his S&L; into the ground and lost nearly $70,000 of their assets on the Ozark Mountain resort project called Whitewater Development Corp.

Hillary Clinton’s role as a former attorney for the savings and loan is at the center of the controversy. The White House has acknowledged that, while on a $2,000-a-month retainer, she worked with Madison Guaranty on a proposal to sell stock, a step that required approval of state financial regulators who had been appointed by her husband.

But it has said that her role was minimal. And although regulators ultimately approved the stock sale, the S&L; did not carry it out.

Thus Mrs. Clinton’s integrity as well as the President’s will be on the line as Fiske, the special counsel, seeks to determine whether Whitewater involved any wrongdoing by high government officials. The outcome could matter not only to Mrs. Clinton personally--she is said by associates to be concerned that legal defense costs could bankrupt the family, whose assets are modest by presidential standards--but also to the Administration policy to which she has devoted much of her time.

Robert Blendon, a Harvard University expert on public opinion and health care reform, said that the Administration had based the selling of its controversial health care reform package on the credibility of the First Lady.

Administration officials believe that health reform is such a complicated issue that few people grasp its every nuance. Thus, the thinking at the White House has been that the public--and even some members of Congress--will have to “trust Hillary” and make a huge leap of faith.

To that extent, the continuing distractions do not bode well for the chances of congressional enactment of comprehensive reform as proposed by the Clintons.

Times staff writer Karen Tumulty contributed to this story.