Whitewater surges, and the Clintons grab for the paddles - investigation into Bill and Hillary Clinton's finances while he was Arkansas governor, Whitewater Development Corp. and the failed Madison Guaranty Savings and Loan Association - Cover Story

Insight on the News, March 7, 1994 by Micah Morrison

Whitewater runs deep, opponents of the Clintons claim. Every week seems to bring new twists in the story of a land deal gone bad, a failed savings and loan and a tragic White House death. Rumors of secret bank accounts and sexual liaisons swirl in the shadows. Charges of a cover-up haunt the administration.

But do the unraveling of the Whitewater Development Corp., the collapse of the Madison Guaranty Savings and Loan Association and the mysterious suicide last summer of Deputy White House Counsel Vincent Foster spell real trouble for the president and first lady? The White House maintains that the media feeding frenzy is much ado about nothing. After weeks of stonewalling, the White House in January turned the matter over to Special Counsel Robert B. Fiske Jr. to counter what presidential adviser George Stephanopoulos called "a barrage innuendo, political posturing irresponsible accusations." Meanwhile, a high--ranking team of White House advisers was meeting daily to exercise some 3pin control over the story.

President Clinton's aides, however, are discovering what even the most powerful officials eventually come to understand: Some stories cannot be rewoven; narratives sometimes take on a shape and life of their own. This must be an especially disquieting lesson for the team that captured the White House after 12 years of Republican rule. For if the story of the Clintons' long, successful march to the presidency was narrated as a simple morality tale of New Democrat triumph over "a decade of greed," Whitewater is shaping up as a kind of dark countertale with a subtext of hypocrisy, complicated and mysterious, offering glimpses into the not-so-simple past of the first couple.

In the end, it may turn out that Whitewater reveals more about mores than criminal behavior, particularly in the case of Hillary Rodham Clinton. The former first lady of Arkansas was, by all accounts, the chief financial officer in the Clinton partnership. Following the money, in the old saw of investigative journalism, may lead to Hillary, but how likely is it that it will lead to Bill? As Mrs. Clinton's biographer Judith Warner notes in Hillary Clinton: The Inside Story, "a close circle" of family and friends has been protecting Bill Clinton at least since 1984 and "still stands right, lips shut."

William Faulkner would have appreciated the Clintons: There is an air of yuppie "Snopesism" about them. Faulkner's fabled Snopes clan was the vehicle by which the author portrayed some of the vast socioeconomic changes under way in the South after the Civil War, as a new class fought its way into power. By the time Hillary Rodham arrived in Arkansas in late 1974 -- flush with the thrill of having been a bit player on one of the Watergate committees that forced the resignation of President Nixon -- the New South was in full bloom. Bill and Hillary Clinton fit right in as leaders of the power elite.

The 1970s were the wellspring of Whitewater and a time of transition for Hillary Rodham Clinton from sixties liberal to lawyer and political spouse. In an address to the 1969 Wellesley College graduating class, she noted with scorn that the "prevailing, acquisitive and competitive corporate life ... is not the way of life for us." In 1993, Mrs. Clinton returned to those themes. "Throughout the 1980s," she told graduates at the University of Michigan, "we heard too much about individual gain, about the ethos of selfishness and greed." But did she take her own advice?

In 1977, after a brief teaching stint, Hillary Rodham joined Little Rock's prestigious Rose Law Firm. Within three years, she made partner At Rose, she zoomed to the top of the heap in the highly competitive corporate firm, prevailing over her rivals in business and politics and engaging in financial dealings about which some have raised questions.

At the center of much of the wheeling and dealing was James McDougal. He was, recalls one Clinton friend, "rather gaudy, not cut from quite the same cloth" as the Clinton inner circle, which included Rose partners Vincent Foster and Webster Hubbell as well as Arkla Inc. Chairman Thomas McLarty -- all of whom would occupy key positions in the presidential administration.

Bill Clinton went way back with McDougal. In 1978, the Clintons joined McDougal and his then-wife, Susan, in forming the Whitewater Development Corp. They borrowed $200,000 from banks and bought 230 acres in northern Arkansas, planning to develop the area into vacation and retirement homes and split the profits equally. Yet, in the first of many apparently irregular moves, then-state Attorney General Clinton and his wife contributed less to the financing of the deal than the McDougals. By the end of the year, Clinton was governor and McDougal was a top aide.

The Whitewater deal signals the beginning of a long and complex series of connected events, plagued by missing records, that have investigators and reporters scratching their heads. Shortly before Clinton's 1980 gubernatorial loss, McDougal left the administration and bought the Madison Bank and Trust in Kingston, Ark. In 1980, the bank lent Hillary Clinton $30,000 to build a model home on one of the Whitewater lots.