Madison Guaranty
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Madison Guaranty Savings and Loan Association was a
savings and loan association A savings and loan association (S&L), or thrift institution, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans. While the terms "S&L" and "thrift" are mainly used in the United States, ...
based in
Little Rock, Arkansas Little Rock is the List of capitals in the United States, capital and List of municipalities in Arkansas, most populous city of the U.S. state of Arkansas. The city's population was 202,591 as of the 2020 census. The six-county Central Arkan ...
. 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 The Federal Deposit Insurance Corporation (FDIC) is a State-owned enterprises of the United States, United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks. The FDIC was cr ...
. Beginning in 1982, the bank was owned and managed by Jim McDougal, a friend of
Bill Clinton William Jefferson Clinton (né Blythe III; born August 19, 1946) is an American politician and lawyer who was the 42nd president of the United States from 1993 to 2001. A member of the Democratic Party (United States), Democratic Party, ...
and
Hillary Clinton Hillary Diane Rodham Clinton ( Rodham; born October 26, 1947) is an American politician, lawyer and diplomat. She was the 67th United States secretary of state in the administration of Barack Obama from 2009 to 2013, a U.S. senator represent ...
. On March 8, 1992, during the
1992 United States presidential election The 1992 United States presidential election was the United States presidential election, presidential election, held in the United States, on November 3, 1992. The Democratic Party (United States), Democratic ticket of governor of Arkansas B ...
the bank was the subject of an article in ''
The New York Times ''The New York Times'' (''NYT'') is an American daily newspaper based in New York City. ''The New York Times'' covers domestic, national, and international news, and publishes opinion pieces, investigative reports, and reviews. As one of ...
'' by
Jeff Gerth Jeff Gerth is an American investigative reporter. He spent several years at ''The New York Times'', writing lengthy, probing stories. He won a Pulitzer Prize in 1999 for covering the transfer of American satellite-launch technology to China. He ...
, which linked the bank to
Whitewater Development Corporation 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 ...
, owned by McDougal and the Clintons. After Clinton's election as president, the bank was the subject of investigations by the
United States Congress The United States Congress is the legislature, legislative branch of the federal government of the United States. It is a Bicameralism, bicameral legislature, including a Lower house, lower body, the United States House of Representatives, ...
and special prosecutor
Ken Starr Kenneth Winston Starr (July 21, 1946 – September 13, 2022) was an American lawyer and judge who as independent counsel authored the Starr Report, which served as the basis of the impeachment of Bill Clinton. He headed an investigation of mem ...
as part of the
Whitewater controversy 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 ...
. 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 in Augusta,
Arkansas Arkansas ( ) is a landlocked state in the West South Central region of the Southern United States. It borders Missouri to the north, Tennessee and Mississippi to the east, Louisiana to the south, Texas to the southwest, and Oklahoma ...
. From June 1979 to December 1981, assets grew from $2.6 million to $3.8 million. In April 1982, an audit by the
Federal Home Loan Bank Board The Federal Home Loan Bank Board (FHLBB) was a U.S. board created by the Federal Home Loan Bank Act in 1932 that governed the Federal Home Loan Banks (FHLB or FHLBanks), also created by the act; the Federal Savings and Loan Insurance Corporatio ...
, the bank's regulator, found substantial losses and questioned the solvency of the bank. Later in 1982, Madison was acquired by Jim McDougal and Steve Smith. John Latham was named
chief executive officer A chief executive officer (CEO), also known as a chief executive or managing director, is the top-ranking corporate officer charged with the management of an organization, usually a company or a nonprofit organization. CEOs find roles in variou ...
. The bank continued its rapid growth, increasing in assets from $6.7 million at the end of 1982 to $48.6 million in 1986. In 1983, McDougal and his wife,
Susan McDougal Susan Carol McDougal (née Henley; born June 27, 1955) is a real estate investor who served prison time as a result of the Whitewater controversy. Her refusal to answer "three questions" for a grand jury, on whether President Bill Clinton lied ...
, took control of the institution. 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. In August 1986, the Federal Home Loan Bank Board ordered McDougal's removal from management of Madison, although he remained its owner.
Robert W. Palmer 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. As a land appraiser he admitted to conspiring with Jim McDoug ...
, an appraiser, admitted to falsifying appraisals. In 1986, the assets of the bank peaked at $125.5 million. On March 2, 1989, Madison was seized by Federal regulators and put into
receivership In law, receivership is a situation in which an institution or enterprise is held by a receiver – a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights" – especia ...
with the
Federal Savings and Loan Insurance Corporation The Federal Savings and Loan Insurance Corporation (FSLIC) was an institution that administered deposit insurance for savings and loan institutions in the United States. History Establishment The FSLIC was established by the National Housing Act ...
as receiver. 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 Restitution and unjust enrichment is the field of law relating to gains-based recovery. In contrast with damages (the law of compensation), restitution is a claim or remedy requiring a defendant to give up benefits wrongfully obtained. Liability ...
to the
Small Business Administration The United States Small Business Administration (SBA) is an independent agency of the United States government that provides support to entrepreneurs and small businesses. The mission of the Small Business Administration is "to maintain and str ...
and the Federal Deposit Insurance Corporation. Madison Guaranty and McDougal hired the
Rose Law Firm Rose Law Firm is an American law firm headquartered in Little Rock, Arkansas. It dates its origins to November 1, 1820, sixteen years before Arkansas statehood, when Robert Crittenden, born 1797, and Chester Ashley, born 1791, entered into an a ...
, where Mrs. Clinton worked, as a defense attorney. Mrs. Clinton's billing records on Madison Guaranty and McDougal's Castle Grande
real estate development Real estate development, or property development, is a business process, encompassing activities that range from the renovation and re-lease of existing buildings to the purchase of raw Real Estate, land and the sale of developed land or parce ...
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.


References

{{Reflist, 1 Whitewater controversy Fraud in the United States Banks established in 1979 Banks disestablished in 1989 Defunct banks of the United States Defunct companies based in Arkansas Banks based in Arkansas Bank failures in the United States Savings and loan crisis 1989 disestablishments in Arkansas 1979 establishments in Arkansas