Replay of ‘80s Not Flattering to Clintons : Whitewater: Hearings paint picture of Arkansas get-rich-easy scheme and a hint of a capital cover-up. But how is the story playing across the country?

As a candidate for President, Bill Clinton ran against the 1980s as the “decade of greed and self-seeking.” A Democrat of humble origins, he promised to be the voice of “the hard-working Americans . . . who pay the taxes and play by the rules.”

Last week, however, Republicans in Congress turned their own spotlight on the 1980s, and it did not flatter the former governor of Arkansas and his wife.

The House Banking Committee, focusing on the Arkansas resort project known as Whitewater, showed how Clinton, as a 31-year-old candidate for governor, was offered and accepted a virtually no-lose business proposition.

Meanwhile, a special Senate investigating committee, concentrating on the suicide of White House aide and longtime Clinton confidant Vincent Foster, listened as others in the President’s inner circle contradicted each other over the way police investigators were blocked from seeing Foster’s files.

There was nothing necessarily illegal about any of this, and the hearings yielded no evidence of crimes committed by Bill or Hillary Rodham Clinton. But the Whitewater affair--with its get-rich-easy scheme in Arkansas and its hint of cover-up in Washington--may not wash with Clinton’s “hard-working Americans who play by the rules.”

That is a political point that Republicans were all too happy to exploit. House committee members, holding up their checkbooks, said no one made their mortgage payments for them. Whitewater, said House Banking Committee Chairman Jim Leach (R-Iowa), is fundamentally a story of political “hypocrisy” and the “arrogance of power.”

“Time after time in the 1980s,” Leach said, “politicians posturing in public as defenders of the little guy found themselves in private advancing the interests of a small number of owners who ran financial institutions, as one Madison [Guaranty Saving & Loan] employer told regulators, like a ‘candy store’ for insiders.”

Leach put Clinton squarely in that category. The hearing record established by his committee last week showed that he and his wife, both Yale Law School graduates, admitted they never visited the 230 acres of real estate they were buying on the scenic White River. They said they did not even know just how the land was to be paid for.

“Our agreement with Jim and Susan McDougal about the financing of the Whitewater project was oral, not in writing,” the President told investigators. Mrs. Clinton added that the couple put up $500 in capital for the venture.

Between 1983 and 1986, the McDougals, acting largely through Madison Guaranty Savings & Loan, which they owned, paid out $134,000 to keep Whitewater afloat. Their business partners, the First Family of Arkansas, paid nothing.

Leach said the federally insured deposits of small savers were “siphoned out” of Madison in part to prop up a failing real estate venture owned in part by the governor. While the “state political elite” shielded itself from the losses, he said, American taxpayers had to pay the $60-million tab when McDougal’s S&L; finally folded.

The committee released documents showing that when the Clintons were asked by their bank to pay the accumulating interest on their Whitewater loan, Mrs. Clinton replied that she was not aware they owed anything.

“I ask that you speak with either Mr. or Mrs. McDougal who have made all the arrangements for this loan,” she wrote in a letter of Aug. 11, 1982.

That created an opening that committee Republicans immediately filled. “If I had a debt or mortgage, I think I’d at least have some curiosity about who was paying my debt for me,” said Rep. Peter T. King of New York.

Rep. Gerald C. (Jerry) Weller of Illinois labeled Whitewater as “the ultimate sweetheart deal” for the benefit of the “Arkansas political elite.”

“I think the taxpayers back home might be interested in how they can become full partners in a 230-acre development and have somebody else pay the bills for them,” he said.

Leach conceded that the Republicans deserved their share of blame for the S&L; debacle, which cost the taxpayers at least $150 billion. The Ronald Reagan Administration followed an “imprudently ideological deregulation agenda,” he said, that allowed thrift executives, such as James McDougal, the freedom to fritter away insured deposits, secure in the knowledge that the government would bail out the depositors.

Democrats complained that the focus on Whitewater and Madison was unfair and wildly out of proportion to the dollar sums involved. The $60-million Madison failure paled in comparison with the billion-dollar losses at failed S&Ls; in Texas, California and Florida. And the $88,000 diverted from Madison into the Whitewater project played only a small role in its demise, they pointed out.

Nonetheless, this is the only S&L; collapse that touches on Clinton, and last week’s hearings succeeded in laying out the clearest account yet of the Whitewater affair.

In the summer of 1978, Bill Clinton was a 31-year-old state attorney general, earning $26,500 a year, slightly less than his wife. He was also the Democratic candidate for governor in a solidly Democratic state.

Clinton, in an interview with investigators for the Resolution Trust Corp., which got the job of cleaning up the S&L; fiasco, said: “I had had several general conversations with Jim McDougal about real estate development. It was my impression he was a successful developer.”

The McDougals and the Clintons took out loans totaling $202,611 to pay for the land along the White River. There the story gets complicated.

While the Clintons said it was their “understanding” that they would be “equally liable” for paying off the loans, the McDougals in fact paid most of the cost. How much is not clear.

Repeatedly, investigators said, McDougal took out loans to pay off the Clintons’ loans or had his state-chartered S&L; make their interest payments.

“We did not keep the books or records of the project,” Hillary Clinton told investigators.

The RTC hired the San Francisco law firm of Pillsbury, Madison & Sutro to try to reconstruct the Whitewater project. Its report, released in April, concluded that by mid-1986, the Clintons had put $35,970 into the Whitewater venture and the McDougals, $158,523.

But House Banking Committee investigators doubt those figures. Unable to find canceled checks or bank records to confirm the Clintons’ payments, they said the President and his wife put less than $11,000 into the project.

“The Clintons put essentially no resources of their own into Whitewater,” Leach asserted last week, but they stood to gain several hundred thousand dollars if all the lots had sold as planned.

What did McDougal get from the project?

In several instances, he used his connections with the governor to win favorable actions from the state on such matters as sewer hookups and selling beer in a dry county. “In short, McDougal made an investment in Gov. Clinton,” King said.

The Rose Law Firm, where Hillary Clinton was a partner, certainly profited from its association with McDougal’s S&L.; Mrs. Clinton and other Rose partners billed Madison for legal work during the early 1980s. By the end of the decade, the firm was paid $1.4 million by the RTC to help clean up the state’s insolvent S&Ls;, including Madison.

RTC officials testified last week that the Rose firm would not have been given that business if Hillary Clinton had disclosed that she had done work for Madison.

By 1992, when Clinton ran for President, Whitewater was not only a money loser but a political liability as well. Republicans accused the First Family of blocking a criminal investigation of their Arkansas dealings and of concealing the files that reveal the full story.

Neither charge was proved in last week’s hearings, although several witnesses bolstered those claims.

For example, L. Jean Lewis, an RTC investigator based in Kansas City, said she found evidence of bank fraud at Madison and filed 10 “criminal referrals” that mentioned the Clintons as beneficiaries of some fraudulent transactions.

But senior government lawyers with no ties to the Clinton Administration said her claims were exaggerated and could not be proved in court as criminal violations.

Hearings in the Senate’s special Whitewater committee have followed a totally different course. Its Republicans have theorized that Foster, a partner in the Rose firm who became deputy White House counsel, may have been the keeper of the Clintons’ Whitewater files.

In four weeks of hearings, the special committee tried to answer one question: Why were White House aides so unwilling to let police investigators enter Foster’s West Wing office after his suicide was reported?

They heard sharply conflicting accounts from those who were there, and the testimony seemed only to heighten suspicion among the majority Republicans.

Sen. Richard C. Shelby (R-Ala.) went so far as to accuse former White House Counsel Bernard Nussbaum of having “stonewalled a real investigation” of Foster’s death.

All along, the Democrats have said Whitewater is much ado about very little. The Republicans say it is a major scandal yet to be fully revealed.

At week’s end, the members of both investigating committees headed home for the August congressional recess, anxious to learn whether anyone has been paying attention.

Times staff writer Edwin Chen contributed to this story.