VIEW FROM WASHINGTON / JAMES RISEN : Whitewater Affair Raises the Spectre of Hypocrisy for Clintons

Ever since Whitewater became a serious problem for the White House, the President and First Lady have claimed not to understand just how and why this sordid little affair turned into a full-fledged scandal.

One big reason, of course, is the still-unanswered question of whether any crime was committed. A special prosecutor is investigating that one.

But Whitewater has also been kept alive as news because it raises the specter of political hypocrisy on the part of the Clintons. With each disclosure, it becomes more clear that the family’s private financial dealings could hardly conflict more sharply with the anti-greed, anti-1980s rhetoric of the public Bill and Hillary Clinton.

Indeed, Whitewater would not resonate so forcefully if both the Clintons had not consistently hammered home the message that the 1980s were a time when dark forces of avarice were let loose by the failed policies of Reaganomics.

“The 1980s were about acquiring--acquiring wealth, power, privilege,” Hillary Rodham Clinton said last year. “The 1980s ushered in a Gilded Age of greed and selfishness, of irresponsibility and excess and of neglect,” added her husband. Candidate Bill Clinton frequently criticized the hollow “paper” economy of leveraged buyouts and Wall Street deal-making. He said he wanted to put America on track for more legitimate, sustainable economic growth.

If there was one theme that ran through many of the Clintons’ past personal investments, it was that they were symptomatic of those times the Clintons have publicly railed against: They were paper deals, often facilitated by insiders, and were based on who the Clintons knew--not what they knew about personal investing:

* The Clintons got started in the Whitewater real estate deal through James McDougal, a friend and onetime aide to Bill Clinton when he was Arkansas governor. Whitewater was a 50-50 joint venture between the Clintons and Jim and Susan McDougal.

* When Bill Clinton was just beginning his rapid ascent in politics--before he and Hillary had much money--the Clintons were able to finance their ambitious Ozark Mountains resort project by taking out loans of more than $200,000 from a small Arkansas bank with no collateral. Their signatures sufficed.

* Later, when Hillary Clinton wanted to pay off a $30,000 Whitewater loan from a McDougal-controlled bank, she turned to a tiny bank on the other side of Arkansas that was owned by the state banking commissioner her husband had appointed.

The Clintons and McDougals proved to be rather hard-hearted landlords. More than half the buyers of Whitewater lots lost their land back to the company after the Clintons and McDougals foreclosed because of missed payments, the Washington Post reported recently.

They included Clyde Soapes Jr., a Texas grain elevator operator who hoped to build a cottage at Whitewater but lost his land when he became critically ill with diabetes--even though he had already made 35 payments, covering most of the purchase price, the Post said.

Although it was perfectly legal, Whitewater was adhering to a sharp business policy the locals call “poor man’s real estate financing.” In return for receiving loose approval terms for their land purchases, buyers did not receive deeds to their lots until their final payments were made. That allowed the Clintons and McDougals to sell several pieces of land more than once.

Whitewater was just one of a dizzying array of investments and private deals in which the Clintons became involved. Unlike the typical upper-middle-class couple, they developed a penchant for exotic investments they heard about through their influential friends.

Hillary Clinton’s commodities trading is a case in point.

She quickly turned $1,000 into nearly $100,000 in the highly volatile cattle futures market, guided in her trades by James Blair, general counsel for Tyson Foods, a giant, state-regulated poultry producer. What’s more, Mrs. Clinton’s first commodities broker allegedly allocated winning trades to favored clients during the time she was investing through him. In a legalistic response to questions about whether she gained from such allocations, she has said there is “no evidence” that she received preferential treatment.

Hillary Clinton invested again in commodities futures in 1979 and 1980, got into a Colorado oil drilling partnership as a tax shelter, invested in a South African diamond mine while apartheid was still in full force, and set up a small investing partnership of colleagues at the Rose Law Firm in Little Rock--with Vincent Foster Jr. and Webster Hubbell, who both came to Washington to work in the Clinton Administration.

She also joined a limited partnership--made up of partners in her law firm--that took advantage of the tax laws to turn the firm’s building into a tax shelter. And, while she has said she found commodities trading so stressful that she pulled out for good in 1980, income tax records show that in 1987, she was trading as much as $150,000 in a single day in stock index futures.

Money magazine, taking the Clintons to task for Whitewater and Hillary’s commodities trading, says in its May issue that the Clintons’ “principal investments in the late 1970s were in real estate development and in the under-regulated commodity markets--investments of the it’s-not-what-you-know-but-who-you-know variety.” The magazine warned readers against trying to follow the Clintons’ lead: “Unless you are a governor’s wife, stick with bonds or the stocks of growing enterprises.”

One result of the revelations about the Clintons’ finances may be that they will find it harder to attack the rich and the business community for opposing higher taxes or health care reform. In fact, Mrs. Clinton already seems to have been put on the defensive. In her remarkable April 22 news conference on Whitewater, she said she and her husband had never attacked the idea of making money per se.

“I mean, I don’t think you’ll ever find anything that my husband or I said that in any way condemns the importance of making good investments and saving, or that in any way undermines what is the heart and soul of the American economy--which is risk taking and investing in the future,” she told reporters. “What I think we were saying is that, like anything else, that can be taken to excess.”

The political problem she and the President are facing is this: Excess is in the eye of the beholder.