Searching for the Missing Pieces

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But there is a strong reason for White House efforts to soft-pedal the whole affair, and it can be put in a single word: Hillary. Compared with the President, the First Lady was a central player. Among other things, she sought power of attorney for Whitewater and represented McDougal's S&L before a state regulator appointed by her husband, then Arkansas Governor. "This is hers," says a White House official. "If the troopers ((who accused Bill Clinton of extramarital affairs)) were about him, this one is about her."

But within the White House no one is allowed to voice anything that sounds like criticism of Hillary. The last person who tried -- staff secretary John Podesta, who suggested that Mrs. Clinton might have had something to do with the dismissal of the White House travel-office staff -- was banished from the inner circle for months. It would take considerable bravery for a Clinton aide to face the President with advice to agree to a special counsel and let the chips fall where they may, since some of those chips might fall on his wife's head. Late last week, nonetheless, some senior White House officials did discuss the special counsel idea with Clinton, but even the Commander in Chief deferred to Hillary's fierce opposition -- at least for now. The problem for the White House, of course, is that stonewalling, or the suspicion of it, only intensifies the questions.

The essential background is simple enough: the Clintons and McDougals formed Whitewater, a company that tried unsuccessfully to sell land in northern Arkansas for vacation homes, in 1979, Clinton's first year as Governor; it lingered in existence until late last year. In 1989, McDougal's S&L, Madison Guaranty, went broke, costing federal taxpayers $47 million. Madison was regulated by Clinton's state government, while its deposits were insured by the Federal Government.

Suspecting check kiting and other abuses, the Resolution Trust Corp., the federal body formed to clean up the affairs of failed S&Ls, referred the matter to the Justice Department in 1992 for investigation and possible prosecution. The referral, which has never been made public, mentioned the Clintons, but in what capacity is uncertain. People who have seen the referral say it definitely did not identify the Clintons as suspected wrongdoers. Some say they were named as potential witnesses, or as people who might have benefited from improper activities, though perhaps unwittingly. As investigators delve more deeply into the tangled affair, they will be seeking answers to these questions:

WAS MONEY FROM MADISON GUARANTY AND/OR WHITEWATER DIVERTED INTO CLINTON'S CAMPAIGNS FOR GOVERNOR? The RTC is known to have raised this question. The grounds for its suspicions are somewhat less clear. But there is no question that James McDougal was one of Clinton's money raisers. In particular, it is known that he held a fund raiser in 1985 and came up with $35,000 to help repay Clinton for a $50,000 loan that the Governor had made to his own campaign fund the previous year (making personal loans to their campaigns is a common practice among politicians). There is some suspicion that at least part of the money may have come from Madison's depositors rather than from bona fide individual contributors.