Posted on March 14, 1994 in Washington Watch

The lead story in Washington for the past week concerns the Clintons’ involvement in a real estate deal of the failed Whitewater Development Corporation. The story is essentially an old one and, on the face of it, appears to be more confusing than serious.

The scandal gets its name from the Whitewater deal which the Clintons and friends of theirs, the McDougals, launched in the early 1980’s. The scheme ultimately failed, as did many similar investments when the national real estate market plummeted at that time. Their are some questions about why the Clintons did not claim a loss on their tax report for the year in which the Whitewater deal fell through, but these were investigated rather thoroughly during the 1992 campaign and judged to be not very serious.

The story is that in addition to being a friend of the Clinton’s, James McDougal was the head of the Madison Guaranty Savings and Loan, which ultimately became insolvent and was shut by federal regulators. Hillary Clinton, as a partner in the Rose law firm, represented Madison before Arkansas state regulators who were curious about the financial strength of the institution, and she apparently persuaded them of its solvency. Questions have been raised about the propriety of Hillary Clinton’s representation of Madison before a state agency headed by a person appointed by her husband; and about whether at any time the Clintons became aware that McDougal was leading Madison into insolvency.

Another facet of the story is that another Rose partner and Clinton friend, Webster Hubbell (who is now the third-ranking person at the Department of Justice), represented the Federal Deposit Insurance Corporation in its legal action against Madison. Hubbell somewhat quickly struck a deal which seemed to let Madison off rather lightly. The personal and professional links between Hubbell and the Clintons raise the question of whether somehow the Clintons helped to get special treatment for their friend James McDougal.

Even in this brief and incomplete summary, it becomes clear how complicated the Whitewater case is, involving as it does so many interweaving personal, professional and political links. Moreover anyone familiar with a small state like Arkansas knows that such dealings are commonplace and, while not wholly ethical, are almost unavoidable where the state’s leaders in politics and business move closely together in the same social circles, with personal ties going back years before any of them rose to prominence.

It is not surprising, therefore, that while Republicans have been trying for months to use the Whitewater story to discredit the President, they were unable to do so.

For one, the story remained too confusing. Although it was fascinating to the President’s political opponents and to some reporters, it didn’t make sense to the general public. And, even when pieces of the story were understood, they seemed rather trivial in comparison with the major issues of the day – particularly when it was understood that these incidents took place well prior to Clinton’s Presidency.

And so while Whitewater remained an irritant to the Clintons, it was essentially a back-page non-story. Even when the President bowed to Congressional pressure and appointed an independent special prosecutor to investigate the case, the public barely took note.

But the Whitewater saga has exploded into a major press sensation over the last two weeks, largely due to miscues by the White House itself. The story’s enhanced status is threatening to weaken Clinton’s public standing and his chances to control the nation’s political agenda in this critical legislative (health care, welfare reform, crime) and election (with 34 Senate and all 435 Congressional seats on the line) year.

In order for a non-story to become a scandal, it must be validated and it must develop extensions so that it grows in dimension with each passing day.

In part, it was Clinton’s appointment of a special prosecutor that first gave validation to the Whitewater story. After all, the press and the public could ask, if there were no problem, why appoint an independent investigator to look at it? But it was on March third, however, that the Whitewater story truly began to develop and gain the momentum necessary to become a scandal.

On that day, the Washington Post reported on its front page that key Clinton White House officials were briefed by the Department of the Treasury about the ongoing investigation into the failed Madison Savings and Loan, with which the Clintons have been linked. On that same day, papers across the country reported that Hillary Clinton’s former law partner and now Associate Attorney General (Webster Hubbell) was being accused of excessive billing in a case in which he had been representing that same bank. The paper also covered reports that the special prosecutor is reopening the investigation into the reported suicide of Vincent Foster. Foster, who had been Deputy White House Legal Counsel, was another of Hillary Clinton’s former partners at Arkansas’ Rose law firm who had been involved with the Whitewater land deal.

The next day’s national press reported that former employees of the Rose firm in Arkansas claimed that some files of Foster’s which related to the Whitewater had been shredded. Although there has been no firm proof that the Rose firm did in fact shred any files, there are enough doubts that the story has stayed alive. (And within the past few days, reports have also surfaced about a safe which was removed from Foster’s White House office after his suicide, the contents of which investigators have been denied.)

There were also stories suggesting that White House Legal Counsel Bernard Nussbaum had mishandled the entire affair in an unethical manner; and whether those allegations were true or not, they did lead to Nussbaum’s resignation. And all the while there were daily stories of prominent Republican Senators who mistrusted the White House’s handling of the scandal and were calling for a Congressional investigation of the case.

Within the next few days, once again, the press was filled with new Whitewater stories: Six Clinton Administration officials involved in the briefing between the White House staff and the Treasury Department were subpoenaed by the special prosecutor to testify before a Grand Jury. There were questions about Hillary Clinton’s role in the Rose firm and allegations that she had called for the shredding of the Foster files. And there were questions about whether the President or Hillary Clinton knew of the ethically questionable briefings that the Treasury Department provided to White House staff on the Madison Savings and Loan investigation.

By now, the still and ever more confusing Whitewater story had all the ingredients of a national scandal. In this atmosphere, the press began its practice of feeding on the crisis and competing for new and more sensational aspects of the story.

As Howard Kurtz, the media critic for the Washington Post, put it: “Like on any big story, when all the big news organizations are chasing it, you are afraid to sit on any little development for fear that the other guy will have it tomorrow. So it does lead to overplaying some incremental developments.” In his interview with the White House Bulletin, he added, “I don’t think there is any question that journalists are far more absorbed by the Whitewater saga than the rest of America. I don’t think most people understand the story, and I don’t think most people care about the story.”

The White House Bulletin ran a major article about the feeding frenzy itself, using the example of the strange series of rumors regarding the death of Vincent Foster. The New York Post ran an article about the safe that was allegedly moved from Foster’s office after his death, something which the White House denies. The reporter of the story, however, unwittingly helped to start a more wild rumor that Foster actually committed suicide in an apartment in Virginia and was moved to the park where his body was later found. How did this story get started?

The answer is unclear. The source of the rumor claimed that the Post reporter conveyed information about an apartment used by Clinton advisors in Virginia to a Senate staffer and asked for confirmation. The staffer professed ignorance, but then began to spread the rumor that Foster committed suicide there. The spokesman for the Senator denied the story, as did the Post reporter. However, the influence of the rumor was felt on Wall Street where the Dow Jones average fell more than 40 points before recovering slightly.

The Bulletin warned its readers: “As often happens with scandal stories, at times the rumors can run ahead of the facts. Bulletin readers should expect to hear many more rumors in the weeks ahead, with a few of them making their way into the national press.” Whatever the reason, the point is that what was once a minor back-page story has now become a daily front-page headline with new allegations appearing everywhere.

Suddenly the White House is in a very public crisis. Even in a press conference that President Clinton held with Georgian President Eduard Shevernadze, the majority of questions were directed to President Clinton and centered around Whitewater. Once again, the President is not able to define his agenda or control the public debate on issues, and the effects on him have been serious. Public opinion polls show a decline of support for the President, and this is largely driven by attitudes regarding Whitewater.

While in mid-February only 15% of those polled believed that the President may have done something wrong related to Whitewater, today it is up to 36%. This not only further erodes his support in a period when he needs it to pass legislation but it also virtually neutralizes the role that Hillary Clinton can play as the leading advocate for health care reform. Indeed, in recent weeks, the First Lady’s ratings have fallen even more than the President’s. The trouble has been that these two weeks have brought back into public view some of the character questions that have been the Clintons’ most troubling problem since the campaign: his trustworthiness and her arrogance and self-righteousness.

Surprisingly, the polls also show that most people still don’t understand Whitewater and most who do still don’t think that it’s a critical issue. But it is the appearance of a problem, reach’s days new revelations, and the behavior of the White House in response to the problem that have become the issues that now seem to concern the public the most.

There are two things in conclusion that must be kept in mind. First, through all of this, no evidence has yet been presented to link the Pres with any illegal activity. Second, as has been said many times before, Clinton is too good a political campaigner and leader to ever be counted out. He has survived too many crises in the past for anyone to assume that he will not be also able to weather this storm.

But Whitewater is a storm, and as of this date, it seems to still be growing in intensity.

For comments or information, contact jzogby@aaiusa.org

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