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August 3, 1994 - Part 1
(09:30:04) PBS funding credits (09:30:12) Whitewater hearings coverage title screen (09:30:24) Hearings hosts NINA TOTENBERG and DON BODE introduce day's hearing from tv studio and they also speak over footage of the Senate hearing room where people are congregating (09:35:10) Hearing begins: HEARINGS RELATING TO MADISON GUAR- ANTY S&L AND THE WHITEWATER DEVEL- OPMENT CORPORATION-WASHINGTON, DC PHASE VOLUME IV WEDNESDAY, AUGUST 3,1994 U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. The Committee met at 9:30 a.m., in room 106 of the Dirksen Senate Office Building, Senator Donald W. Riegle, Jr. (Chairman of the Committee) presiding. OPENING STATEMENT OF CHAIRMAN RIEGLE The CHAIRMAN. The Committee will come to order. Let me welcome everyone in attendance today. It seems like it was not very long ago we were right back here in this room. I think we adjourned last night shortly after 2:00 a.m., so we are back at it this morning, Today we start the fourth day of the hearings being conducted here by the Senate Committee. on Banking, Housing, and Urban Affairs on the so- called Madison Whitewater matter authorized by Senate Resolution 229. I want to just indicate what our plan for the day will be before we go to our first witness today. We will have four panels that will appear before us in the course of the day. The first one will of course consist of hearing wig the Secretary of the Treasury, Mr. Lloyd Bentsen, who is here us now. The second panel will involve hearing Mr. Eugene Ludwig, who is the Comptroller of the Currency of the United States. The third panel will consist of Mr. Joel 10ein, who is Deputy Counsel to the President. Mr. Neil Eggleston, who is the Associate Counsel to the President. Mr. Clifford Sloan, also Associate Counsel to the President. And Beth Nolan who serves in the same capacity. The final panel will consist of Thomas "Mack" McLarty, the Senior Advisor to the President of the United States Former Chief of Staff to the President. And Ms. Margaret Williams, who serves as Chief of Staff to the First Lady of the United States. As with our prior hearings, we are looking forward to hearing from these witnesses so they can elaborate on the events relating 2 to that aspect of the resolution that we are operating under dealing with the question of whether any improper conduct occurred regarding communications between officials of the White House and the Department of the Treasury, or the Resolution Trust Corporation, relating to the Whitewater Development Corporation and Madison Guaranty Savings & Loan Association. Senator BOND. Mr. Chairman. The CHAIRMAN. Yes, Senator Bond. OPENING COMMENTS OF SENATOR BOND Senator BOND. Before you start, I have a parliamentary inquiry that has to do with the schedule. Yesterday, of course, you know for the first time, we heard Mr. Altman accuse Ms. Hanson of misleading him and the Committee and he told us, for the first time yesterday, that when he was asked if there were any contacts with the White House, after I asked him about the criminal referral, he turned to Ms. Hanson and she nodded her agreement with his answer. Now as far as I know this was not brought out in any of his sworn depositions, When he called me to tell me that there had been other contacts that he had known about, he did not mention that. It seems to me that the Committee ought to consider, in light of this new factor, whether it would be appropriate to bring Ms. Hanson back to comment on that, because we do have a conflict between the testimony of Mr. Altman and Ms. Hanson. And since this has just come up, I would just offer for your consideration, along with that of Senator D'Amato, whether it might be worth bringing Ms. Hanson back for follow up questions to see if her recollection squares with that of Mr. Altman as to what he asked her and what her nod in the negative implied at that time. That may have something to do with how we try to resolve the irreconcilable positions that Ms. Hanson and Mr. Altman had in that testimony. The CHAIRMAN. Well Senator Bond, I think it is a reasonable question, and particularly so because it was cited by Mr. Altman yesterday as part of his presentation, and we of course do not know at least her version of what that exchange was about. My initial instinct on this is to suggest-she was here for the better part of 6 or 7 hours, a long period of time. I would be inclined to want to have our-she has been deposed before-to have our Committee investigators depose her on this point, and to draw her out to let her tell her observations or her version of that situation, and then based on that deposition addition or that new deposition on that point, then make a judgment as to whether we need to have her back in here or not? Senator SHELBY. Mr. Chairman.
Keep Calm Men - New Fashions Bring The Bug-Eyed Look
Should men really keep calm or head for the hills? Paris designer Jacques Esterel unveils his fashions for next summer and he's way out there. He's a great believer in Pop Art, Pop, and he says he had designed these clothes with an eye on the year 2,000. Ah, well, summer madness is upon us in the dead of winter. (glasses, mini-skirt, hat, bridal gown, wedding gown) Paris, France High Angle Shot - POV Catwalk above the stage - The first model has a square patent leather hat on her head and patent leather on the shoulders going down past her bust line on her top, and the cuffs on her pants have patent leather as well. MS - This model is wearing a cap sleeve A-line dress with a bull's eye on the side, once again her hat is square with a front flap. High Angle Shot - Models have on sleeveless tops and matching pedal pushers, on the tops the designer has kitchen utensils hanging. CUS - Man and his better half who can't make heads or tails of the fashions. MS - Model walks down the run-way wearing a short, sleeveless, A-line dress that has a blend of different patterns. MS - Models are wearing longer stove pipe type of shorts cut to the knee and the tops are sleeveless striped pattern and the other model appears to be wearing a solid color but the same kind of out fit. MS - It's either a coat or a dress, but once again it is sleeveless with a large cowl type collar. MS - Model on the run-way is wearing a short lace type dress, she unhooks something on the dress that's located under the arms and the short dress becomes a evening gown. MS - The second model is wearing a solid raw silk dress, that the bottom reminds me of a court jester's outfit, and again she unhooks something under the arm area and it becomes an evening gown. CU - Audience applauding not too enthusiastically though. MS - A model walks out and it looks like she has an up-side-down flower pot on her head, and wedding gown but its covered by material cut out like a walking bill board sign.
A Taste Of Whizz-Ski
Top skiers from all of Europe and the United States draw a crowd of thousands to Kitzbuhel, Austria for the famed Hahnenkamm Men's Ski Event. Billy Kidd of the United States does fine until he sprains an ankle, an injury that will sideline him for the rest of the season. After a series of spectacular spills, Karl Schranz of Austria takes over and wins the 21 1/2 mile downhill test in less than 2:17 minutes, a speed of well over 60 miles an hour. Kitzbuhel, Austria An early morning fog paints a canvas of beauty, people are gathering on the mountain side to watch a great variety of skiing events. High Angle Shot - The town of Kitzbuhel, Austria. MS - Billy Kidd of Vermont is skiing down the hill with great speed. He placed 3rd. MS - This is a very fast course, a skiier looses it, he got bruised but not really hurt. MS - Another skier looses control and he goes tumbling down the mountain. MS - skiier puts on quite a performance. He looses control and his bindings are too tight. MS - Karl Schranz takes on the mountain going more than 60 MPH. CUS - Pretty girls applauding for Karl. CUS - Karl Schranz shaking hands with a ski official
Bombings Resume: President Blames Hanoi Aggression
For the first time in 37 days, United States planes carry out air strikes against North Vietnam. President Johnson, in an address to the nation, says that continued efforts to bring Hanoi to the peace table were fruitless and blames their aggressive acts for the decision to resume air raids on supply depots and rail lines. Washington DC President Lyndon Baines Johnson sitting at his desk in Washington DC. Vietnam MS - Sailors on an aircraft carrier, preparing the planes for battles, and loading them up with bombs. CUS - Sailors securing bombs under the wings of the fighter jets. MS - Ground forces, Army jeeps, trucks and tanks, soldiers in fox holes. CU - Foot soldiers on patrol, Jet taking off from an air strip in Vietnam. MS - Jet taking off from the flight deck of an aircraft carrier. Aerial shot of North Vietnam being bombed. CU - Co-pilot in fighter jet. Air to Air shot - Jet over North Vietnam, dropping bombs. Over these images President Johnson, "... on this Monday morning in Vietnam, at my direction, after complete and thorough consultation and agreement with the Government of South Vietnam, United States aircraft have resumed action in North Vietnam. They struck the lines of supply which support the continuing movement of men and arms against the people and the Government of South Vietnam. Our air strikes on North Vietnam from the beginning have been aimed at military targets and have been controlled with the greatest of care. Those who direct and supply the aggression really have no claim to immunity from military reply. The end of the pause does not mean the end of our own pursuit of peace. That pursuit will be as determined and as unremitting as the pressure of our military strength on the field of battle. In our continuing pursuit of peace, I have instructed Ambassador Goldberg at the United Nations to ask for an immediate meeting of the United Nations Security Council. He will present a full report on the situation in Vietnam, and a resolution which can open the way to the conference table." New York, NY Ends with shots of the Untied Nations.
Mystery Explosion: Fatal Blast Wrecks Two Boston Hotels
Authorities have not yet pin-pointed the cause of an early evening blast that ripped through two Boston hotels, killing ten people and injuring at least sixty others. Gas flumes in the basement exploded through the floor of a ground level restaurant and diners were dropped into the cellar. Boston, Massachusetts Camera pans the exterior of a Boston hotel. CUS - Aftermath of the explosion in the basement of the hotel. MS - When the explosion happened it took out a floor of a restaurant and seven of its customers fell into the basement, one of the victims is taken out on a stretcher and placed in an ambulance. MS Exterior of the hotel you can see all the damage that the explosion caused. There are firemen and rescue workers still searching for people. Exterior shot of the hotel and the aftermath of the explosion. Camera panning up to show blown out windows. Exterior shot - Up heaved cement from the explosion. CUS - A fireman climbing down a latter to probe the extent of the damage in the basement and to make sure there are no more victims. CUS - Firemen straighten out the fire hose.
August 3, 1994 - Part 1
(09:40:18) The CHAIRMAN, Yes, Senator Shelby. OPENING COMMENTS OF SENATOR SHELBY Senator SHELBY. I understand what you want to do as far as, and you certainly can do it as the Chairman. I understand all that. But would not the best witness be Ms. Hanson, herself, if she were shown that video and if she could elucidate on what that nod 3 meant, I mean, I think that would be, and the Committee took a little time watching that. It probably would not take 5 minutes. The CHAIRMAN. Well- Senator SHELBY. Sometime today or tomorrow. The CHAIRMAN. I am open to suggestions from all Members. I have not seen us do anything in 5 minutes around here, including say good morning, so I think it would be Senator SHELBY. But I think it is a very important point. The CHAIRMAN. It is an important point, and I agree with you on that, but I think maybe the orderly way to do this, the way we started out, we deposed everybody, and people testify under oath, and she would have the opportunity to do that and see what her response is. And then I think we will circulate that to everybody and we can make a judgment. I think we can have the information and then decide exactly what it amounts to and what we want to do with it. Senator SHELBY. When the lawyers would be deposing here, I assume they would be showing her the video? The CHAIRMAN. Absolutely. Senator SHELBY. What did you mean by the body language? The CHAIRMAN. Exactly. Senator DAMATO. Mr. Chairman. The CHAIRMAN. Senator DAmato. OPENING COMMENTS OF SENATOR DAMATO Senator DAMATO. I have absolutely no problem with the manner in which you described giving her the opportunity and her counsels to review with her counsel. I am sure they already know and they have watched and heard about this. But I do think we should, at the very least, give her the opportunity to decide whether or not she wants to come in. We may decide, after the depositions, that we think it is appropriate or not, but I think if she thinks she wants that chance to do it, she certainly should be given it, and that is the best evidence to have her here and to respond. But certainly the initial, if we can get an initial contact and the time to get her deposed and if her counsel is ready to bring her in here without being deposed, why that is another matter, so maybe we should address that question immediately and have staff begin the preliminary contacts to see whether or not we can set up a time pretty quickly to do that. The CHAIRMAN. Well I am going to give guidance to the Committee staff to be in touch with Ms. Hanson to arrange to get her response to what took place in that exchange, and once we have that, we can evaluate it. She may confirm what he has said. If she has a different recollection, we will have that and certainly if she asks to come back on that point, I think we would have to respect that desire. Senator SHELBY. Mr. Chairman, as I recall, I want to review the transcript because I think she was asked about that, whether or not an exchange occurred. Obviously the assistance of -the video tape may help, but I would just urge, and I think what you have described as a process sounds reasonable enough here, but I hope 4 these hearings do not sort of become tantamount to the gift that keeps on giving. I mean, at some point here, we have got to move on. Arid then I can see where Mr. Altman, because there were a couple of other people sitting at that table, would want those people deposed to see what they had to say about the conversation. This can just go on interminably. So I would hope that we would try to discern what you can and then try to limit this back and forth. Senator BOND. Mr. Chairman, clearly it would be expeditious to set up a deposition as you and Senator DAmato have described. I would urge you to do that, and then make the determination based on what is said at the deposition whether Ms. Hanson wishes to come back to answer before the full Committee or whether we feel we need to have her back. Clearly, we do not need to ask all the others, but I would agree with the procedure that you have outlined. It seems to me only reasonable since this is a critical point. Thank you. The CHAIRMAN. Well we will proceed in that fashion and we will begin now so that we get a timely response to the question. Mr. Secretary, former colleague of many years in this body, we are pleased to have you here. I am going to ask you now to stand and take the oath. [Witness sworn.] The CHAIRMAN. Now it is my understanding that you have a statement that you want to deliver and make it part of the record, and we would like to hear from you now. TESTIMONY OF LLOYD M. BENTSEN, SECRETARY, U.S. DEPARTMENT OF THE TREASURY Secretary BENTSEN. Thank you very much. Mr. Chairman, Senator D'Amato, Members of the Committee, I would like to cover a number of points this morning. For organization's sake, I want to present my testimony in four parts. First, I want to describe my relationship to the Oversight of the Resolution Trust Corporation and how my office operates, I want to next address my recollection of events. I would like to also discuss the steps I have taken over the past few months. And, finally, I want to cover the conclusions which have been reached and the actions that I will take. Knowing that the responsibilities of a Cabinet Officer are different from those of a U.S. Senator. I put two systems in place when I came to Treasury.
August 3, 1994 - Part 1
(09:45:34) Senator KERRY. Mr. Chairman, I apologize to the witness. I am a little hard of hearing and The CHAIRMAN. I think if you could just pull that mike a little closer, and you might want to put the papers up on the front of that wooden stand, then I think it will move toward you, and then everyone can hear you clearly. Secretary BENTSEN. You want me to start over? The CHAIRMAN. No, that is all right. 5 Secretary BENTSEN. And finally I want to cover the conclusions which have been reached and the actions I will take, Senator can you hear me? Senator KERRY. Yes, sir. Secretary BENTSEN. OK. Knowing that the responsibilities of a Cabinet Office are different from those of a congressional office, I put two systems in place when I came to Treasury to help me make the transition. First, as it regards the RTC, I serve as Chairman of the Oversight Board. By law, I am prohibited from involving myself in any day-to-day activities, I can discuss policy in broad terms, but I cannot intervene in a case-specific matter. I asked my Legislative Director, Mike Levy, to make it clear if Members of Congress or staff inquired about specific cases, that they should be directed to the RTC and not to me. Second, I have organized my office such that all paper work on matters of policy and Treasury's varied operations flow through my Executive Secretary, Mr. Ed Knight. Ed is the gatekeeper. It is his job to make certain that what crosses my desk, as it regards the RTC, or any issue, for that matter, contains only those materials I should be seeing, and nothing else. We have a thick manual about how information flows to my office. I insist on written briefings. It makes the best use of my time. It is the best way I found to absorb information. When I am asked for a decision, I expect a memo that gives me the background, lays out the options, tells me what the staff recommends. That way, I can either make the decision, or let my staff know I want more information, or I want a meeting on the issue. That is how I deal with substantive issues, not in some bull session. I prefer the distilled thoughts that they finally come up with as they prepare a memorandum to me, and I want it a relatively short one. In short, I have a very organized office procedure. I have run my office like that for years. I did it in business, I did it in the Senate, and I do it now as Secretary of the Treasury. When I was building a business, a good part of my time was spent on an airplane going about the country, and I would have my associates prepare the memorandums for me so I could study them on the plane, or if I had some spare time, I would do that. Let me give you an example. When I was in business, I can recall I had a decorator in to decorate my office. And he said he was going to put an ottoman in my office, and I said, do not you put an ottoman in here, I do not have time for people to put up their feet. They are not coming here to visit. We are trying to do business. And that is the way it has been. Mr. Chairman, if someone wanted to communicate with me in a meaningful way, that is how they would have done it, through my in box with a memo, with a meeting on which I was briefed in writing, That is not to say I do not have occasional impromptu visits from or conversations with my staff, because I do. That often happens if there is a developing crisis that has to be dealt with. But for matters of any import, I prefer paper. 6 I asked my staff to go back and look at my office records to see what I was involved in over the period in which the Committee is interested. I have a memorandum I want to put into the record. My staff says that from September 23, 1993, until March 21, 1994, 1 had nearly 800 meetings on 560 topics. I attended 130 meetings at the White House. Met with 51 Members of Congress. Testified on the Hill 11 times. I received more than 500 written briefings prepared for my meetings. I delivered 60 speeches, gave 80 interviews, had 25 press conferences, and I want you to get this. I received over 2,400 memos and during that period, I traveled to 6 countries and 10 States.
Black Sand Beach
Canal--picturesque **foot bridge
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Captain Cook's Mountain
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ON PREVIEW CASSETTE #98018 Close-Up of Beach
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Mauna Kea (?) over sugar cane
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Kealakakua Bay
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Clouds & Lodgefrom Haleakala
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Mossy Rocks on Wall
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A small dam and cascade
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Scratched Beach
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Beach thru Palace
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(Cine) Beach
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Beach ***
August 3, 1994 - Part 1
(09:50:43) This entire issue revolves around meetings that I understood were on the issue of handling press inquiries about the Madison Guaranty referral, or on the procedures that the RTC would follow in pursuing civil claims. There are differing recollections, but they are about actions that two independent investigations tell us broke no criminal law and violated no ethical standard. I have turned the Treasury Department upside down. I have turned my memory inside out. We went through thousands and thousands of documents. And I cannot find one written briefing to me on these White House meetings, not one. It was not until March 3rd that I learned the extent of these meetings. I issued a statement about the meetings and said that I had not attended them and did not know about them. I maybe walled off from most RTC matters, but I am responsible for what happens at the Treasury Department and I accept that responsibility. And that is why I asked immediately for the Office of Government Ethics to examine these contacts. They are a nonpartisan agency. They are the experts. And preparing for this hearing, I agreed to the Committee request to avoid looking at materials regarding the case until I gave my deposition to the Committee Staff. I agreed to that request, although it sure frustrated me, because I wanted to wade into this and find out all I could. I had to wait over 4 months to start looking at these papers. After I gave my deposition last week, I sat down and began to read through the material. I saw nothing that changes my recollection. Let me lay out for you what my basic recollection is about these matters. First, I read in the press, some time in October, about criminal referrals and Madison Guaranty. Second, on February 1st, Roger Altman and Jean Hanson came to my office. Roger told me he was thinking of recusing himself. And the other subject that came up was the legislation on extending the statute of limitations, Later that month, Roger told me he decided not to recuse himself On February 23rd, I met with Roger and Jean Hanson briefly, in advance of the RTC Oversight Hearing the 24th. I again told Roger Altman the recusal issue was a personal issue for him. On the 25th of February, I learned that Roger had testified the day before as to one meeting with people from the White House, 7 I had been at that meeting. I left to go to a working lunch with some CEO's. I did not hear his testimony because I was not here at that point. On March 3rd, I read in the press about two additional meetings, It was then that I asked for the OGE examination of the contacts and issued my statement. Now I would like to review the subsequent events. Our Treasury Department Inspector General's office was asked to support the Office of Government Ethics examination. Mr. Fiske, the Independent Counsel, was already looking at this from the standpoint of criminal statutes. After I asked the Office of Government Ethics to examine the ethics issues involved, Mr. Fiske asked the Treasury Inspector General to suspend his work while Mr. Fiske's investigation was underway. And the Office of Government Ethics also independently decided it would hold off until Mr. Fiske's work was complete so as not to interfere. Now I want to point out the lengths to which Treasury Department, at my direction, went to cooperate with Mr. Fiske, with the Inspector General, and with the Congressional Committees. Every scrap of paper that remotely looked like it might conceivably have some relation to the Madison Guaranty Savings and Loan or to contacts with the White House was turned over to various investigators, something on the order of 6,500 pages.
August 3, 1994 - Part 1
(09:55:34) We went through hundreds of thousands of documents with investigators to find the ones they needed. We used extra warehouse space to hold back our trash. I brought in professional investigators from the IRS to go through the top offices of the Treasury, mine included. We removed computers from the offices of those involved, including those used by the support staff, had experts go through them to find anything that would be useful. They worked around the clock quite literally. We searched offices nationwide to see what could be found, and my staff was always promptly available to Mr. Fiske, the IG and the Congressional investigators to answer questions. Now when Mr. Fiske completed his report on this phase of the examination, and concluded that no criminal laws were broken, I asked the Office of Government Ethics to complete its examination of the contacts and report back to me. Over the past weekend, I received the Office of Government Ethics' report. I released it to the public. And then I sent it to the President's Counsel. I also sent it to every Member of this Committee and the House Banking Committee, The Office of Government Ethics, after a careful analysis of the independently gathered facts, says I can conclude that those working at the Treasury did not, repeat, did not violate any of the standards of ethical conduct for employees of the Executive Branch of Government. I heard a Senator say something the other day that stuck with me. He said that, in this town, an allegation is synonymous with conviction without benefit of a trial or a hearing. Clearly, in retrospect, it might have been better if some of these meetings or contacts had not taken place, or had occurred in a dif- 8 ferent context. But when you boil it down, no criminal law was broken, and the people who work at Treasury did not violate the ethical standards. And no one at Treasury intervened in any way or interfered in any RTC action. The Office of Government Ethics report did say it was troubled by some of the contacts. And it raised important issues that I believe should be addressed. The Office of Government Ethics said it appeared that there were misconceptions by Treasury officials that may have contributed to the contacts. Those include a possible lack of appreciation of the difference between a Treasury function and one belonging to the Resolution Trust Corporation and what rules apply. They also include a misconception about the standard on the use of nonpublic information, and a misconception about the function of a recusal. Those are very good points. I would point out the unique situation in which these contacts occurred no longer exists. Mr. Altman is no longer Acting CEO of the RTC. And there no longer are lines of responsibility here that could give rise to misconceptions about job functions and the rules that apply. So the possibility for the jumbling of roles and a confusion about the rules has been greatly lessened. I have only had this report for -a few days. I am not going to make any knee- jerk reaction to what clearly are complex issues involving management of Treasury functions. I want to reserve judgment on that. I am not going to make my decisions in the heat of debate. I will study this information, and any thoughts the Committee might have, and take whatever steps I consider appropriate. Now before I conclude my testimony, I want to remind the Committee of one important point. The Treasury Department has a law enforcement role, as do a number of other Government agencies. It is critical that the Department be able to communicate with other agencies and the White House when necessary, Let me give you some examples.
Waikiki Beach
Waikiki Beach. Young men walk by, then young women in opposite direction and one girl looks over her shoulder at guys.