Madison Guaranty

Last updated
Madison Guaranty Savings and Loan Association
Type Joint-stock company
Industry Banking
Founded1979;44 years ago (1979)
DefunctMarch 2, 1989;34 years ago (March 2, 1989)
Fate Bank failure
Headquarters Little Rock, Arkansas
Owner Jim McDougal

Madison Guaranty Savings and Loan Association was a savings and loan association based in Little Rock, Arkansas. The company operated from 1979 until 1989 when it was shut down by federal regulators as a result of bank failure, leading to a loss of $60 million for the Federal Deposit Insurance Corporation. Beginning in 1982, the bank was owned and managed by Jim McDougal, a friend of Bill Clinton and Hillary Clinton. On March 8, 1992, during the 1992 United States presidential election the bank was the subject of an article in The New York Times by Jeff Gerth, which linked the bank to Whitewater Development Corporation, owned by McDougal and the Clintons. [1] After Clinton's election as president, the bank was the subject of investigations by the United States Congress and special prosecutor Ken Starr as part of the Whitewater controversy. McDougal was investigated to determine if he improperly diverted money from the bank to Whitewater or the Clinton campaign during the Arkansas gubernatorial election, 1984.

History

In 1979, the bank received a state savings and loan charter from Arkansas as Woodruff County Savings and Loan. [2] From June 1979 to December 1981, assets grew from $2.6 million to $3.8 million. [2]

In April 1982, an audit by the Federal Home Loan Bank Board, the bank's regulator, found substantial losses and questioned the solvency of the bank. [2] Later in 1982, Madison was acquired by Jim McDougal and Steve Smith. [2] [3] John Latham was named chief executive officer. The bank continued its rapid growth, increasing in assets from $6.7 million at the end of 1982 to $48.6 million in 1986. [2] In 1983, McDougal and his wife, Susan McDougal, took control of the institution. [2] [4]

In a 1984 audit, federal regulators found the bank was making unsound loans and noted that if paper losses were realized, Madison would be insolvent. [2]

In August 1986, the Federal Home Loan Bank Board ordered McDougal's removal from management of Madison, although he remained its owner. [2] Robert W. Palmer, an appraiser, admitted to falsifying appraisals. [5]

In 1986, the assets of the bank peaked at $125.5 million. [2]

On March 2, 1989, Madison was seized by Federal regulators and put into receivership with the Federal Savings and Loan Insurance Corporation as receiver. [6]

On April 14, 1997, Jim McDougal was convicted of 18 felony counts of fraud conspiracy charges as a result of bad loans made by Madison. He was sentenced to 3 years in prison and payment of $4.27 million in restitution to the Small Business Administration and the Federal Deposit Insurance Corporation. [7]

Madison Guaranty and McDougal hired the Rose Law Firm, where Mrs. Clinton worked, as a defense attorney. Mrs. Clinton's billing records on Madison Guaranty and McDougal's Castle Grande real estate development project could not be found. How much work she actually did on Madison and Castle Grande was the subject of the missing billing records. McDougal also held a fundraiser at Madison Guaranty that paid off Clinton's campaign debt of $50,000. Madison cashier's checks accounted for $12,000 of the funds raised. On January 4, 1996, Clinton's billing records were found on a table in the White House, which showed that she performed a mere 60 hours of legal work for Madison in 1985 and 1986. [8]

Related Research Articles

The Whitewater controversy, Whitewater scandal, Whitewatergate, or simply Whitewater, was an American political controversy during the 1990s. It began with an investigation into the real estate investments of Bill and Hillary Clinton and their associates, Jim McDougal and Susan McDougal, in the Whitewater Development Corporation. This failed business venture was incorporated in 1979 with the purpose of developing vacation properties on land along the White River near Flippin, Arkansas.

<span class="mw-page-title-main">Susan McDougal</span> American real estate investor

Susan Carol McDougal is a real estate investor who served prison time as a result of the Whitewater controversy.

<span class="mw-page-title-main">Savings and loan crisis</span> US financial crisis from 1986 to 1995

The savings and loan crisis of the 1980s and 1990s was the failure of 32% of savings and loan associations (S&Ls) in the United States from 1986 to 1995. An S&L or "thrift" is a financial institution that accepts savings deposits and makes mortgage, car and other personal loans to individual members.

James B. McDougal was a native of White County, Arkansas, and his wife, Susan McDougal, were financial partners with Bill Clinton and Hillary Clinton in the real estate venture that led to the Whitewater political scandal of the 1990s. Starting in 1982, McDougal operated Madison Guaranty Savings and Loan Association.

<span class="mw-page-title-main">Robert B. Fiske</span> American lawyer

Robert Bishop Fiske Jr. is an American trial attorney and a partner with the law firm of Davis Polk & Wardwell in New York City. He was the United States Attorney for the Southern District of New York from 1976 to 1980 after earlier having served as an assistant in the office from 1957 to 1961.

Great Western Bank was a large retail bank that operated primarily in the Western United States. Great Western's headquarters were in Chatsworth, California. At one time, Great Western was one of the largest savings and loan in the United States, second only to Home Savings of America. The bank was acquired by Washington Mutual in 1997 for $6.8 billion.

<span class="mw-page-title-main">Financial Institutions Reform, Recovery, and Enforcement Act of 1989</span>

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), is a United States federal law enacted in the wake of the savings and loan crisis of the 1980s.

David Hale is a former Arkansas municipal judge and former Arkansas banker. He alleged the charges that resulted in the Whitewater scandal trials.

Laura Jean Lewis is a former senior investigator for the Resolution Trust Corporation. She is credited with initiating the Whitewater investigation against President Bill Clinton.

Robert W. Palmer is a former Madison Guaranty land appraiser. He pleaded guilty to federal conspiracy charges related to Whitewater and was later pardoned by President Bill Clinton.

Christopher Wade is a retired real estate broker/owner of Ozarks Realty Company in Flippin, Arkansas. He was the real estate agent associated to the Clinton's Whitewater controversy in Arkansas.

John Latham is a former CEO of Madison Guaranty that came into front page national news due to the Whitewater investigations.

Jeff Gerth is an American former investigative reporter for The New York Times who has written lengthy, probing stories that drew both praise and criticism. He won a Pulitzer Prize in 1999 for covering the transfer of American satellite-launch technology to China. He broke stories about the Whitewater controversy and the Chinese scientist Wen Ho Lee.

Castle Grande was a real estate development in Arkansas about 10 miles south of Little Rock. It came into National news as a result of the Whitewater investigations. The project was a 1,050-acre (4.2 km2) lot where Jim McDougal hoped to build a microbrewery, shopping center, a trailer park and other future projects in 1985. The land was scrub pine forest that had failed already as an industrial development. The sales price was $1.75 million. State regulations prohibited Jim McDougal from investing more than 6% of his Madison Guaranty S&L assets. So, he put in $600,000 of Madison money and then for the difference had Seth Ward put in the remaining $1.15 million. This money Ward borrowed from Madison Guaranty on non-recourse, no personal obligation to repay. If federal regulators found out, McDougal's S&L could be shut down, since it had already been operating under orders to correct its lending practices.

James M. Lyons is an attorney at law in Denver, Colorado. He is a commercial trial lawyer with extensive public service.

James M. Fail was an American financial executive who served as chairman of Stone Holdings, Inc. and Bluebonnet Savings Bank. A native of Mobile, Alabama, he attended Murphy High School and served for three years in the U.S. Navy. After graduating from the University of Alabama in 1949, he began his career as a securities salesman for Merrill Lynch. In the following decades, Fail and his holding companies have owned and operated a variety of investment, mortgage, banking, savings and loan, and insurance businesses throughout the U.S.

Guaranty Bank was a major bank based in Austin, which collapsed in 2009. It was formed in 1988 as part of Temple-Inland and in 2007 became a standalone company. At the time of its collapse, Guaranty was the second largest bank in Texas, with 162 branches across Texas and California, and had $13 billion in assets and held $12 billion in deposits. Major shareholders included billionaire investor Carl Icahn and hotel tycoon Robert Rowling, who jointly invested $600 million in the bank in 2008.

Bank United Corporation, headquartered in Houston, Texas, was a broad-based financial services provider and the largest publicly traded depository institution headquartered in Texas before its merger with Washington Mutual in 2001. Bank United Corp. conducted its business through its wholly owned subsidiary, Bank United, a federally chartered savings bank. The company operated a 155-branch community banking network in Texas, including 77 in the Dallas/Fort Worth Metroplex, 66 in the greater Houston area, five in Midland, four in Austin, and three in San Antonio; operated 19 SBA lending offices in 14 states; was a national middle market commercial bank with 23 regional offices in 16 states; originated mortgage loans through 11 wholesale offices in 10 states; operated a national mortgage servicing business serving approximately 324,000 customers, and managed an investment portfolio. As of June 30, 2000, Bank United Corp. had assets of $18.2 billion, deposits of $8.8 billion, and stockholder's equity of $823 million.

<span class="mw-page-title-main">Legal career of Hillary Clinton</span>

Following her graduation from Yale Law School in 1973 until becoming first lady of the United States in 1993, Hillary Clinton practiced law. In 1988 and 1991 The National Law Journal named Clinton one of the 100 most influential lawyers in the United States.

<span class="mw-page-title-main">Hillary Clinton's tenure as First Lady of the United States</span>

Hillary Clinton served as the first lady of the United States from 1993 until 2001, during the presidency of her husband Bill Clinton.

References

  1. ↑ Gerth, Jeff (March 8, 1992). "THE 1992 CAMPAIGN: Personal Finances; Clintons Joined S.& L. Operator In an Ozark Real-Estate Venture". The New York Times .
  2. 1 2 3 4 5 6 7 8 9 Barth, James R.; Brumbaugh, Jr., R. Dan (1996). The Condition and Regulation of Madison Guaranty Savings and Loan Association in the 1980s: A Case Study of Regulatory Failure (PDF). JAI Press.
  3. ↑ "Whitewater started as 'sweetheart' deal". CNN . May 6, 1996.
  4. ↑ "Caught In The Whitewater Nets". CBS News . May 19, 1998.
  5. ↑ LABATON, STEPHEN (December 6, 1994). "Appraiser on Madison Loans in Plea Accord". The New York Times .
  6. ↑ HAYES, THOMAS C. (March 3, 1989). "U.S. Regulators Seize 37 Ailing Savings Units in 6 States". The New York Times .
  7. ↑ "Jim McDougal Draws Three Years in Prison". CNN . April 14, 1997.
  8. ↑ "Washingtonpost.com: Whitewater Time Line". www.washingtonpost.com. Retrieved 2021-06-07.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.