The Michigan Daily - Monday, January 10, 1994 - 3
First Lady's law
firm is said to have
Audit shows Mrs.
Clinton's law firm
told regulators S&L
was solvent months
before it went bust
WASHINGTON (AP) - Nine
months after Hillary Clinton's law
firm told state regulators a troubled
,,rkansas thrift was heading for im-
rovement, federal regulators painted
a starkly different picture. They
warned that the institution was teeter-
ing near insolvency because of risky
land ventures and accounting irregu-
tial March 1986
audit by the
B o a r d
McDougal Madison Guar-
anty Savings and Loan funds appeared
to have been improperly diverted to
projects and associates of the thrift's
owner, James McDougal.
Eight years later, that allegation is
a key focus of a widening federal
probe into the thrift's failure that has
now embroiled the Clintons.
Investigators are trying to deter-
mine whether the S&L's funds were
used in the mid-1980s to pay Clinton's
political debts, and whether Madison
deposits were diverted to other enti-
ties controlled by McDougal. This
includes Whitewater Development
OLorp., a real estate partnership the
Clintons formed with McDougal and
The Clintons have repeatedly said
there was nothing improper in their
business dealings. In an interview
Friday with The Associated Press,
McDougal supported the first family's
position, saying the Clintons "in no
way benefited" from his activities.
McDougal also emphatically de-
fended his business record, saying
Madison's funds were never diverted.
The 1986 audit, obtained by the
AP, never mentions the Clintons or
Whitewater. It does, however, por-
tray Madison as financially reckless,
rife with conflicts and on the brink of
"The problems discussed in this
report (conflicts of interest, high-risk
land developments, poor asset qual-
ity, rapid growth, inadequate income
and net worth, low liquidity, securi-
ties speculation, excessive compen-
sation, and poor records and controls),
constitute a significant threat to the
continued existence of the Institu-
tion," the 78-page report stated.
The tone of the report contrasts
with the more reserved, sometimes
optimistic assessment the Rose Law
Firm had given state regulators a few
At the time, Mrs. Clinton, through
her firm, had been placed on a $2,000-
a-month retainer by McDougal and
was working to get the state to ap-
prove a novel stock issue plan to help
recapitalize the thrift. She wrote a
letter to convince state regulators that
the plan was legal.
Correspondence in the matter sug-
gests Mrs. Clinton's role was limited,
with most of the firm's work done by
Rose associate Richard Massey.
. The letters show the firm was
aware in 1985 that Madison did not
meet federally mandated cash reserve
But in a June 17, 1985, letter to
state regulator Beverly Bassett,
Massey suggested improvements
"The applicant anticipates that no
deficiency will exist in the near fu-
ture," Massey wrote - a key assur-
ance since the state required the cash
reserve limit be met as a condition for
use of the recapitalization plan.
Though approved, the plan was
never implemented because Madison
never met those FHLBB require-
No one answered the phone yes-
terday at Massey's office and there
was no listing for his home.
The Rose firm made no mention
to the state of a1984 FHLBB audit
that warned risky land investments
had greatly weakened the thrift.
A march of human rights activists is turned back yesterday at a roadblock near San Cristobal de Las Casas.
Mexitcan rebels regroup
SAN CRISTOBAL DE LAS
CASAS, Mexico (AP) - Who were
those uniformed rebels with the red a
bandanas and the wool ski masks? <
Before they seized town halls
throughout this impoverished south-;
ern state and declared war on the
government on New Year's Day, vir-
tually no one had ever heard of the
Zapatista National Liberation Army.
They have since vanished back
into the rugged mountains andjungles
near the Guatemalan border. But
through government reports, rebel+
publications and statements made by+
individual rebels, aprofile of the group
is emerging: it is made up of well-+
organized and well-trained Indian 1
soldiers headed by seasoned leaders
who fought in earlier uprisings in
Mexico and Central America.+
Among the dozen people formally
charged in connection with the upris-
ing, one is a Guatemalan citizen. +
The rebels, named after the early
20th century Mexican revolutionary
Emiliano Zapata, say they are fight-
ing for poor Mayan peasants and so-
cialism and against Mexico's elite.
"We will not stop fighting until
7 nue to prioltest
our basic demands are met, forming a 1970s.
free and democratic government," It calls them "experts in combat,
they said in a statement faxed to news highly trained and educated," and
agencies. makes much of the fact that the top
It is not clear how big the group is. rebel leader, who goes by the name
Some estimates say it numbers about Comandante Marcos, had European,
1,200 but neither the government nor not Indian, features.
the rebels will confirm this. "This is not an indigenous move-
The group has operated since last ment nor is it a peasant action," ac-
year in Ocosingo, Las Margaritas, cording to the 28-page Interior Min-
Comitan, Altamirano and Chanal, istry report. "It is the work of profes-
according to a government report. sionals manipulating the dispos-
The rebel leaders appear well-edu- sessed."
cated. Judging from the December The government also blames "cat-
edition of the group's newsletter, "El echists," or Roman Catholic lay
Despertador Mexicano" (The Mexi- people who practice liberation theol-
can Awakening), they know Mexican ogy, for helping the rebels.
history, military tactics and revolu- But anthropologists and observ-
tionary theory. ers in the region say the uprising is
During the uprising, their first home grown. They say the govern-
communique came by fax in Spanish ment has blamed foreigners in order
and nearly flawless English. Their to shift attention from the region's
newsletter was distributed in San long-standing problems: desperate
Cristobal during the uprising. poverty and discrimination against
The government claims many of the Indian majority.
the leaders are Central Americans - "The church raises the conscious-
meaning Guatemalans and Salvador- ness of people," said Monsignor
ans, who fought their own wars in the Samuel Ruiz, the bishop of San
1980s - and Mexican revolutionar- Cristobal and a long-time defender of
ies who fought in uprisings during the indigenous rights.
Mich. voters support
tighter gun control
By JAMES CHO
DAILY STAFF REPORTER
Friends and family members came
together at the Power Center for the
Performing Arts Saturday morning to
remember the life of the man for whom
the center is named.
Regent Emeritus Eugene Power
-the father of the microfilm, a knight
and philanthropist - passed away
Dec. 8 at his Barton Hills residence at
the age of 88. He had been fighting
Parkinson's disease since 1972.
Kind, thoughtful, aggressive, gen-
erous and diligent were some of the
adjectives that speakers used to de-
scribe Power Saturday.
University President Emeritus
Harlan Hatcher spoke about his 42-
year relationship with Power as he
addressed more than 200 friends, col-
leagues and family present at the hour-
"In the presence of a man like
Gene, you cover a lot of territory -
from Eskimo Art to microfilm xerog-
raphy to the acquisition of the site of
the Battle of Hastings ... to the vi-
brant Ann Arbor Summer Festival,"
Power revolutionized the infor-
mation age with his development of
modern microfilm technology.
"This made information easily
available," said Joseph Fitzsimmons,
chair of University Microfilms Inter-
national, founded by Power in 1938.
"The microfilm technology has
had an international impact. The pres-
ervation of books on microfilm has
been enshrined in the hearts of all
scholars especially new Ph.D.s,"
Many doctoral dissertations writ-
ten in the United States are photo-
graphed on microfilm.
Power received both his B.A. in
1927 and his M.B.A. in 1930 from the
University. He returned to his alma
mater in 1955 and served two terms
on the University Board of Regents.
"Those were the years when we
were developing North Campus as a
future home for music, engineering,
architecture and the fine arts - that
celestial symbiosis that creates har-
mony among the galaxies," Hatcher
The advancement of the humani-
ties and the arts was one premise for
the formation of the Power Founda-
tion in 1967. The foundation pro-
vided the financial support for his
philanthropic endeavorsmincluding the
construction of the Power Center.
"This elegant structure is only one
eloquent affirmation of his convic-
tion," Hatcher said of the building.
In 1968 Power started the Power
Exchange Scholarship, which is
awarded annually to one University
student to study for two years at Cam-
bridge University in England.
Alexander Hardy, a 1992 Univer-
sity graduate and Power Scholar, said,
"This is the most generous scholar-
Power was made a knight by Queen
Elizabeth II in 1977 for his philan-
thropic efforts in England. Power
headed a fundraising effori the year
before by the American Philosophi-
cal Society to acquire the site in En-
gland of the Battle of Hastings. The
site was given as a gift to the Crown.
Power is survived by his son Philip
Power, his daughter-in-law, Kathleen,
and his grandsons, Nathan Eugene
Power and Scott Thomas Sutton.
Amid calls to restrict
'its authority the Fed
is 'running scared'j
WASHINGTON (AP) - What
should have been a season of triumph
for the Federal Reserve and its chair,
Alan Greenspan, has turned into a
*winter of discontent.
He and other Fed board members,
all holdover Republican appointees,
are defending their turf in a two-front
political war at what seems to be the
least likely time for growing dissatis-
faction with their performance.
The economic expansion is firmly
entrenched. Banks are earning record
profits. Interest rates are the lowest in
ageneration and inflation hasn't been
better since the 1960s.
Yet, a yearlong campaign by Rep.
Henry Gonzalez (D-Texas) chair of
the House Banking Committee, is
picking up momentum. He wants to
open the Fed's closed-door monetary
policymaking to greater public and
And now the Clinton administra-
tion is preparing legislation that would
take away the Fed's 80-year-old di-
rect role in examining and regulating
"It's very hard to comprehend,"
said economist Norman Robertson,
an adjunct professor at Carnegie-
Mellon University in Pittsburgh. "All
these legislative moves that would
strip the Fed of its independence have
been taken ata time when the economy
Ws on the mend."
Pressure from Gonzalez has forced
the Fed to reveal the existence of
previously secret transcripts of its in-
terest-rate policy meetings and make
them public, albeit with a five-year
Gonzalez is pressing for a much
speedier release and other reforms,
including direct presidential appoint-
ment of the heads of the Fed's 12
By themselves, Gonzalez' propos-
als probably couldn't get through Con-
gress. But they might have a chance if
they were tacked onto a reorganiza-
tion bill supported by the administra-
"I think the Fed is running scared
and I think they're right to run scared.
They're facing a committed Treasury
secretary allied with powerful com-
mittee chairs," said Kenneth
Guenther, executive vice president of
the Independent Bankers Association
Both Gonzalez and Sen. Donald
Riegle (D-Mich.), chair of the Senate
Banking Committee, are big backers
of consolidating banking regulation
now spread across four agencies in-
cluding the Fed.
The Treasury plan would create a
new commission run by a five-mem-
ber board composed of one represen-
tative each from the Fed and Treasury
and three independent members ap-
pointed by the president and con-
firmed by the Senate.
Guenther's group, which repre-
sents smaller, community-based
banks, many of them regulated by the
Fed, believes two regulators are
needed as a check against abuses of
Federal Reserve Board member
John LaWare proposed an alternative
that would expand rather than dimin-
ish the Fed's authority, giving it re-
sponsibility for all 8,000 state-char-
tered banks, not just the 1,000 the Fed
Such a hands-on regulatory role is
essential if the Fed is to protect the
financial system during crises such as
the 1987 stock market crash and the
failure of big banks, he said.
But Treasury Secretary Lloyd
Bentsen, in a recent interview, said
the Fed can get all of the information
on banks it needs by participating in
the proposed new banking commis-
sion. And having two banking regula-
tors makes no more sense than having
two competing Food and Drug Ad-
LANSING (AP) -An overwhelm-
ing majority of Michigan voters back
tougher gun controls even though only
46 percent believe those steps would
curb violent crime, according to a
The EPIC-MRA survey coming
out this week found:
87 percent support steps to cut
down the number of licensed firearm
dealers and beef up federal regulation
N 86 percent agree with President
Clinton's statement that it should be
at least as hard to get a gun as it is to
get a driver's license.
* 77 percent back a ban on the
manufacture, possession and sale on
the so-called assault weapons.
70 percent believe all gun own-
ers should be licensed and required to
have safety training.
66 percent would approve of a
law banning magazines holding more
than 10 rounds.
Ed Sarpolus, a partner in the Lan-
sing-based EPIC-MRA, said the num-
bers reflect both the growing empha-
sis that politicians are placing on guns
and the public's fear of crime.
"They're looking for some sort of
solution and everybody is talking
about guns," he said.
Of the 600 people surveyed, 52
percent said they owned guns. Their
support for gun control was nearly as
high as the overall totals, Sarpolus
"They look at these proposals and
they see they won't take away their
rights to own guns or get guns, so they
support them," he added.
Sarpolus said broad support for
the various gun control steps makes it
a political winner for Clinton. Al-
though overall only 46 percent be-
lieve the steps would cut into violent
crime, that was pulled down by men
with 67 percent of the males saying it
would not make a difference. Fifty
percent said they would not make a
difference and 4 percent were unde-
cided or did not answer.
But more significant for Clinton
- who enjoys stronger support from
women - is that 60 percent of the
women believe they would reduce
crime, Sarpolus said.
The telephone survey was con-
ducted Dec. 14-22 and has a margin
of error of 4 percent either way.
A top official with the National
Rifle Association, Tom Washington,
said the survey only proves that "If
you tell a lie long enough and often
enough, then eventually everybody
will believe it. That's been true
"Bill Clinton and all these liberal
politicians aren't really as concerned
about getting at the root causes of
crime in this country as they are about
disarming the American people," he
A U U
SOCIOLOGY 389 2-4 CREDITS
"THE BEST CLASS I'VE EVER HAD!"
AND CHEMICAL DEPENDENCY
JANUARY 10, 1994
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