[Congressional Record Volume 140, Number 23 (Monday, March 7, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 7, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
    WHITEWATER: THE DISJUNCTION OF PUBLIC POLICY AND PRIVATE ETHICS

  Mr. LEACH. Mr. Speaker, I would like to take this opportunity to talk 
not of the issues of the day, but rather of the ethics of our time. In 
so doing, I would like to take as a starting point a scandal that has 
come to be dubbed ``Whitewater'' and suggest it is a central issue not 
because it is big, but precisely because it is small.
  In its very smallness Whitewater evidences the shortcomings of public 
leadership in America today.
  The Dutch architect, Mies Van Der Rohe, once suggested that ``less is 
more.'' The simplicity of design that hallmarked his buildings revealed 
great esthetic character. Analogously, for individuals truth of 
character is more generally revealed in small acts than large gestures.
  Recently a colleague came up to me on the House floor and exclaimed: 
``Jim, what is Whitewater? My stomach tells me something's wrong, but 
I've got no idea what you're talking about. Can you describe it in 
plain English so a plain American can understand?''
  In a nutshell, Whitewater is about the arrogance of power--political 
conflicts of interest that are self-evidently unseemly. It all began in 
the late 1970's when an S&L owner named James McDougal formed a 50-50 
real estate venture with a young politician, the then attorney general 
of Arkansas, Bill Clinton. In this venture called Whitewater, the S&L 
owner and S&L subsidiaries provided virtually all, perhaps all, the 
money; the Governor-in-the-making provided his name.
  Over the years, the company received infusions of cash from the S&L 
as well as from a small business investment corporation which diverted, 
allegedly at the Governor's request, federally guaranteed funds from a 
program designed for socially and economically disadvantaged people to 
the Governor's partners and thence, in part, to Whitewater.
  Some of these funds were used to pay off personal and campaign 
liabilities of the Governor; some to purchase a tract of land from a 
company to which the State had just given a significant tax break. 
Whitewater records have apparently been largely lost. A review of the 
numerous land transactions, however, raises questions of what happened 
to the money that came into the company, and a review of the 
President's tax records raises questions about tax deductions that were 
taken on income that may not have been declared.
  Under the governorship of Bill Clinton, the first lady of Arkansas 
was hired to represent the S&L before State regulators, the president 
of the S&L was placed on the State S&L commission, an attorney who 
represented the S&L was named the State S&L regulator, and the S&L was 
allowed to operate, despite being insolvent for an extended period, 
providing millions in loans and investment dollars to insiders and the 
Arkansas political establishment.

  Under the governorship of Bill Clinton, the S&L was allowed to grow 
25-fold until Federal regulators forced its closing, at which time 
taxpayers picked up the tab for losses that amounted to approximately 
50 percent of the institutions's deposit base.
  The story of Whitewater is thus part and parcel the story of the 
greatest domestic policy mistake of the century--the quarter trillion 
dollar S&L debacle.
  In the largest series of bank robberies in history, which 
precipitated an industry bailout larger than the taxpayers provided 
Lockheed, Chrysler, and New York City times a factor of 10, it is fair 
to ask: ``What happened? Who is responsible?''
  An answer to these inquiries requires an understanding that those 
accountable are not only a few negligent and corrupt S&L owners, but 
attorneys, accountants, State and Federal legislators, regulators, and 
assorted public officials. As wide-ranging as the responsibility is, 
however, it is a mistake to be so glassy-eyed as not to seek lessons 
for the future through a demand for individual accountability for 
breaches of law and ethics in the past.
  Macroeconomics aside, public responsibility for the S&L debacle is of 
a tripod nature, involving: first, the conflict-ridden role of Congress 
in passing loose laws; second, the ideological mistake of the Reagan 
administration in urging deregulation in an industry which requires 
responsible standards; and third, the culpability of a small number of 
State governments, such as in California, Texas, Louisiana, and 
Arkansas, which failed to rein in high-flying, state-chartered, State-
regulated institutions, which because of the Federal nature of deposit 
insurance, precipitated a massive transfer of wealth from States with 
responsible governments to those without.
  In Arkansas it is impressive how the Federal Government was obligated 
to close more than 80 percent of State-chartered S&L's in the 1980's 
and how large taxpayer losses were in relation to the State's S&L 
deposit base. The failure of the Clinton administration in Little Rock 
to fulfill its responsibility to police State financial institutions 
had the effect of increasing tax burdens on citizens of Arkansas as 
well as other States.
  While taxpayers at the national level were forced to pick up the tab 
for the mistakes of politicians in whose elections they could not vote, 
citizens in States like Arkansas were doubly shortchanged. Not only did 
they have to share in eventual bailout costs, but when their home-based 
financial institutions frittered away the hard-earned deposit savings 
of their State to insiders, fewer resources were made available to 
potential homeowners and minority entrepreneurs.
  What the Keating Five scandal was all about was the attempt of an S&L 
owner to compromise through political contributions significant 
political players, in this case five Senators, to influence regulators 
to keep an insolvent, corruptly run institution from being closed. What 
makes Governor Clinton's involvement with a breaching of the vaults of 
an Arkansas S&L philosophically at least equal to, but in reality more 
troubling than the Keating model is that not only did the institution's 
management organize conflict-ridden fundraising endeavors for the key 
politician in the State, but through Whitewater it put the Governor in 
a compromising personal finance position as well.
  What is remarkable is the hypocrisy of the circumstance. Time after 
time in the 1980's, alleged defenders of the little guy in 
American politics found themselves advancing the interests of a small 
number of owners of financial institutions which were run as private 
piggy banks for insiders. The intertwining of greed and ambition turned 
democratic values upside down.

  In our kind of democracy ends simply do not justify means. Just as a 
conservative, who may despise government, has no ethical right not to 
pay taxes, a liberal has no ethical basis to put the public's money in 
his own or his campaign's pocket just because he may have the arrogance 
to believe he is advancing a political creed that is in the public's 
interest.
  Why does all this matter?
  Here, it would perhaps be appropriate to paraphrase a great Senator, 
Ev Dirksen: A few thousand here and a few thousand there and pretty 
soon it adds up to a real scandal. Put another way, an ethical lapse 
here and an ethical lapse there and pretty soon it adds up to a real 
character deficit.
  I have never known anyone in public life better able to put 
embarrassing episodes behind him than Bill Clinton. Accordingly, I 
could not have been more surprised by the discombobulation of the 
administration at the minority's restrained request last November for 
hearings and full disclosure.
  As in most serious public scandals, coverups can prove as troubling 
as the crime.
  The revelations of the past few days that officials of the Department 
of the Treasury and Resolution Trust Corporation briefed key White 
House aides on potential legal actions which independent regulatory 
agencies might be obligated to take against the President and First 
Lady subvert one of the fundamental premises of American democracy--
that this is a country of laws and not men.
  In America, process is our most important product. No individual, 
whatever his or her rank, is privileged in the eyes of the law. No 
public official has the right to influence possible legal actions 
against him or herself. For this reason agencies of the Government, as 
well as the White House, have precise rules that govern their 
employees. Prohibitions against giving preferential treatment to any 
individual, losing independence or impartiality, making decisions 
outside official channels are standard and have patently been violated.
  Seldom have the public and private ethics of lawyers in the White 
House and executive branch departments and agencies been so thoroughly 
devalued.
  It is no surprise the special counsel initiated today a series of 
subpoenas reaching into the White House. What these subpoenas indicate 
is the movement of an investigation from possible illegal acts 
committed by a President prior to taking office to possible illegal 
actions committed in office. Obstruction of justice is now clearly at 
issue.
  It is also no surprise the special counsel has reopened the 
investigation of the Foster suicide. There are simply too many 
questions with too few answers.
  The point of all this is that there is a disjunction in this 
administration between public policy and private ethics. Americans 
abhor privilege; hypocrisy gnaws at the American soul; it leaves a 
dispiriting residue of resentment.
  Can, for instance, a President credibly rail against Michael Milken 
values if he has himself benefited from Milkenesque dealmaking?
  Can a President credibly ask the people to pay taxes, let alone raise 
them, if he refuses to pay his own fair share?

                              {time}  1240

  Can a President credibly espouse open government if he applies a 
hide-and-seek standard to his own actions?
  Can a President credibly ask others to play by the rules--that is, 
obey the law--if he does not play by them himself?
  Can a President credibly ask teenagers to take responsibility for 
their own lives if he refuses as an adult to discipline his own?
  Can a President credibly advance an ethic of national service if his 
own model is one of self-service?
  Can a President credibly advocate campaign reform if his own campaign 
has been sullied by illegal contributions from a S&L, which, with its 
failure, had the effect of causing deferred Federal financing of a 
gubernatorial election?
  Can a President credibly lead an ethical society if he does not set 
an ethical standard?
  Can, in short, a servant of the people put himself above the people 
in personal and public ethics?
  This is not to say the President is wrong on all issues; nor that the 
Democratic Party does not have some thoughtful models of integrity--
Senators Bill Bradley, Dale Bumpers, Paul Simon, and Daniel Patrick 
Moynihan leap to mind, as do so many of our colleagues in the House--
Don Edwards, Sid Yates, Neal Smith, Ron Dellums, Henry Gonzalez, Tony 
Beilenson, Dan Glickman, Bill Richardson, Tim Penny, John Lewis, and 
Floyd Flake, to name a few.
  But it is to suggest that it is no coincidence that the word 
``trust'' appears in the Nation's motto as well as in the names of so 
many financial institutions. Both our political and financial systems 
depend on the trust of those whom they serve. The American people need 
to be able to count on the integrity of the institutions and processes 
that structure their lives, just as they need to have confidence in the 
probity of the individuals who lead and control these institutions and 
processes.
  While government derives its original legitimacy from the consent of 
the governed, it can maintain that legitimacy only if the governors 
operate under the same ethics and rules of conduct as the governed.
  Finally, a personal note. Some have asked why a mainstream Republican 
like myself would lead an investigation so awkward for the President. 
All I can say is that ethics is not an issue of the left, right, or 
center. It is an American concern relating to the fabric and foundation 
of our society. As for motivation, I would simply paraphrase a great 
American who once carried the Republican banner, not to victory, but 
nonetheless with honor and integrity: Moderation in the pursuit of 
truth is no virtue; vigilance in the defense of public ethics no vice.

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