by Dennis Bernstein
Hyde, who argues "no man is above the law" in
President Clinton's impeachment inquiry, escaped legal
responsibility as a former director of the failed Clyde
Federal Savings and Loan because of his political clout,
according to investigators and others in the S&L case.
"Most of the [Clyde] directors were fairly cooperative in that situation," stated former Resolution Trust Corp. investigator Fred Cedarholm. "But Hyde never provided a thing. His attitude was basically 'I am a U.S. congressman. I've done nothing wrong. End of discussion.' Now to have him at Judiciary pontificating is just amazing."
Cedarholm, a feisty numbers cruncher, added that the Bush administration undercut the RTC investigations of Clyde and other well-connected Illinois S&Ls in 1992 by shutting down the RTC office in Chicago "for strictly political reasons."
Walker Todd, former assistant general counsel and research officer for the Federal Reserve Bank of Cleveland, shared Cedarholm's judgment that politics helped Hyde duck the financial fall-out of Clyde's $68 million collapse.
"If his name was John Q. Public, it's obvious he would never escape," said Todd, who oversaw loans to troubled S&Ls. "If you were ranking the [Clyde] directors by guilt or responsibility or negligence, Hyde might have made the top four or five. If you were one of the  directors in that chain, you'd wonder why you're paying and he's not."
In another interview, one of Clyde's former directors raised just that complaint -- that Hyde's political standing spared the House Judiciary Committee chairman from paying his share of an $850,000 settlement which 11 other Clyde directors paid to the federal government in 1997. After escaping the payment, Hyde even arranged to have his $60,000 legal bill picked up by political backers.
Hyde's thin skin
about the Clyde case was irritated,
too, when an independent banking expert named Timothy J.
Anderson pressed demands that Hyde be held accountable.
Hyde paid for a Chicago private eye to conduct an
in-depth investigation of Anderson in 1995.
When the snooping was disclosed last October, Hyde first claimed not to know how it was financed -- a false explanation that he later recanted. Still, Hyde's own use of a private eye to dig up dirt on a critic has not stopped the congressman from challenging Clinton's use of private investigators in Whitewater and related cases.
Despite the seeming hypocrisy, Hyde remains one of Washington's most esteemed figures. With few exceptions, the national press corps has hailed Hyde as a judicious statesman, an "unimpeachable character" in the words of one Washington Post headline. [WP, May 12, 1998]
But those who watched the collapse of the North Riverside, Ill.-based Clyde S&L saw a different side of Henry Hyde: an influential congressman using his political might to shield himself from legal responsibility and financial loss.
Illinois arguably was ground zero for the nation's costly savings-and-loan catastrophe in the 1980s, with the U.S. League of Savings Institutions located in Chicago and with major Illinois congressmen of both parties considered strong supporters of the national thrift industry.
A former member of the House Banking Committee, Hyde was viewed as one of the industry's most influential allies in Congress. But Hyde went beyond giving speeches, backing legislation and accepting campaign donations.
1981, Hyde took the unusual step of joining the Clyde
S&L's board of directors. Hyde said he did so at the
request of Clyde chairman, Sylvia Miedema, a contributor
to Hyde's political campaigns.
At the time, S&Ls across the country were under pressure from a combination of high inflation and fixed lower-interest home mortgages. Clyde, too, was at risk. By May 1982, the Federal Home Loan Bank Board warned that Clyde might face insolvency within 13 to 14 months.
In reaction to the national problem, Congress relaxed S&L regulations, allowing chancier loans. Hyde abstained from these congressional votes because of the obvious conflict of interest. But in the Clyde board room, Hyde’s fellow directors valued his expertise on the new laws.
Though responding to one financial threat, the congressional revisions created another. They made S&Ls tempting prey for unscrupulous investors eager to exploit the federally insured assets.
With Hyde as a director, Clyde was among the S&Ls that quickly traded a stodgy neighborhood reputation in exchange for high-roller glitz. Moving away from the traditional S&L model of local mortgages and small business loans, Clyde opted for risky out-of-state investments, many championed by Hyde.
On May 17, 1982, minutes of a Clyde board meeting showed Hyde seconding a motion to purchase risky securities through a controversial dealer, Swink & Co. of Little Rock, Ark. The securities included $2,875,000 in eurodollars funneled through a Grand Cayman bank.
Anderson, the independent banking consultant investigated by Hyde’s private eye, asserted in an interview that Hyde displayed outrageous judgment.
"Instead of seconding the motion," Anderson said, "Hyde should have jumped up and ran out of the boardroom, instantly when he heard a sleepy Illinois S&L was buying CDs [certificates of deposit] from the Grand Cayman islands where drug-money laundering is the number one business for banks."
Minutes of an October 1982 meeting revealed Hyde encouraging other investments with Swink, a firm that had a checkered reputation. By 1984, Swink would face sanctions from the National Association of Securities Dealers which fined the company $50,000 for failing to maintain adequate net capital.
The company's owner, Jimmy Dale Swink Sr., later would plead guilty to conspiracy to commit securities fraud and serve 21 months in an Arkansas correctional facility.
Sept. 26, 1983, Hyde seconded another risky options
trading scheme. The RTC later complained that "no one on
Clyde's board or employed by Clyde had any prior
experience in this speculative activity." The options
deal ultimately cost Clyde -- and the taxpayers -- $10
Anderson said Clyde's board relied on Hyde for guidance. "All board members looked to Hyde for leadership because of his knowledge not just as a lawyer and the future head of Judiciary, ... but as a former member of House Banking with considerable expertise."
Anderson claimed that Hyde led the S&L into bad decisions. "It was Hyde who got them to invest millions of dollars in a Dallas office project that could not go forward," Anderson said. "Hyde was the ringleader. He was the board member who was controlling management. Hyde was THE man involved."
Anderson also marveled at Hyde's audacity. "Every loan approved while Hyde was on the board," said Anderson, "should have been reviewed to see if it had been approved for political consideration. ... You cannot be an elected official and the godfather of the vault at the same time."
Besides the ill-fated loans, the records showed that Hyde supported special breaks for bank insiders. At a Sept. 27, 1982, meeting, Hyde seconded a motion that offered low-rate loans to board members and other employees.
On Oct. 17, 1983, Hyde backed another questionable motion to transfer $287,625 into an employees profit-sharing plan. The Congressional Accountability Project, a watchdog group connected to consumer advocate Ralph Nader, termed this action "irresponsible" at a time when the S&L was "losing money quickly."
Though the S&L was teetering on the brink, Hyde also secured an "interest on deferred compensation" bonus for Miedema, his campaign contributor.
Hyde quit Clyde's board in 1984, as the S&L crisis started rumbling across the country. Though already saddled with bad loans, Clyde staggered forward. Scores of other S&Ls weren’t so lucky, failing at the cost of tens of billions of dollars, picked up by the U.S. taxpayers.
For many politicians, the S&L melt-down had severe political consequences. Some -- such as the so-called Keating Five senators -- were accused of pressuring regulators on behalf of campaign contributors and wealthy constituents.
By the late
1980s, Clyde also was facing extinction. In
1989, Congress deliberated a new law to force higher
capital standards, strict rules that could put Clyde out
of business and tarnish Hyde’s image.
Hyde rallied to the S&L industry's defense again by sponsoring amendments that would have weakened the reform legislation. But Hyde's amendments lost on the House floor.
The next year, Clyde went belly-up at a cost to the taxpayers of $68 million.
The RTC, which was responsible for cleaning up the national S&L mess, investigated the Clyde failure and found fault in lending practices dating back to the early 1980s.
In an interview, the RTC's Cedarholm told me that the Illinois S&L industry's political clout, including Hyde's muscle, shielded Clyde and other Illinois S&Ls from the tougher investigations seen in Texas and California, which rivaled Illinois as the worst S&L disaster areas.
Cedarholm also recalled that the word came down from Washington in summer 1992 that President Bush, who was battling for re-election, wanted to close the Chicago office. Cederholm said the explanation was that Bush wanted to show progress in resolving the S&L crisis.
But the move disrupted the Clyde investigation at a time when Hyde was a crucial Bush ally. Hyde had defended the president during the Iran-contra scandal and -- in 1992 -- was handling a House inquiry into the "October Surprise" allegations that Bush participated in a scheme to undermine President Carter's Iran hostage negotiations in 1980.
The Bush administration "really did pull the rug out from under us," said Cedarholm, an auditor who specialized in evaluating liabilities of directors and S&L officers, the point most sensitive to Hyde.
"Based on the dirt we'd uncovered," Cedarholm said, "there is no way in hell the Chicago office should have been shut down at that time. It was done for strictly political reasons. ...
"We were doing a lot of squeezing, not only of the executives and the board members, but actually bringing in the borrowers with our attorneys and deposing them, and they were starting to sweat. We were turning up a lot of good stuff which I'm sure was creating a lot of waves in Washington, D.C.
"When you consider ... the number of cases we had, the depth of those cases and the potential liabilities, it was basically ridiculous to take cases from the people who had been working on them for years in Chicago and give them to people in Kansas City to start all over."
By then, however, Anderson, the independent S&L expert, had become intrigued by the Clyde case and began publicizing Hyde's connection.
February 1993, Anderson testified before the National
Commission on Financial Institution Reform, Recovery and
Enforcement. He criticized the federal hesitancy to
press the investigations of Clyde and other Illinois
"They don't want to do it because the conclusion will come back to very prominent people," Anderson said. The whistle-blower singled out for criticism U.S. Attorney Fred Forman -- a politically ambitious Republican who handled federal prosecutions in Chicago from 1990-93.
"Fred Forman's dilemma is, if he starts investigating seriously the failed savings and loans in Illinois, he will see they all link together through a daisy chain of loan participations," Anderson said. "Then, he might have to start taking depositions from now former Cabinet member Ed Madigan, former Cabinet member Ed Derwinsky, and current Congressman Henry Hyde. And Fred Forman just isn't brave enough to start taking depositions from these individuals. So Illinois is going to be buried."
However, with a new administration in place, the RTC filed a $17.2 million suit against 12 Clyde directors, including Hyde, on April 27, 1993.
The RTC cited a long list of questionable banking practices, including squandering millions in federally insured dollars on tricky options deals and out-of-state investments. The RTC complained of mismanagement, gross negligence, breach of fiduciary duties and breach of contract.
Still, Hyde's statesman-like reputation in Illinois and Washington insulated him from serious political damage, even though the suit made him the only sitting congressman who allegedly participated in direct decisions that ruined an S&L.
Hyde mounted a spirited defense against the RTC accusations. Hyde denied responsibility for the S&L failure, insisting he had relied on the judgment of "professionals" and full-time directors. He insisted the thrift was healthy when he departed in 1984 and termed the RTC's action "an abuse of government power."
1995, Hyde's defense team ordered an undercover
investigation designed to discredit Anderson, who kept
demanding that Hyde accept responsibility. In an
interview, Chicago-based private eye, Ernie Rizzo,
acknowledged that he was hired to do "a total and
complete investigation" of Anderson, a former Marine and
Republican precinct captain.
"Mr. Anderson apparently liked to talk to reporters [and] apparently had a desperate need to see that the directors of the Clyde Savings and Loan were punished and he wasn't going to let go until they were punished," Rizzo told me. "My client wanted to know what his position was, who he was, what he was doing in this case."
During the two-month investigation, Rizzo interviewed "quite a few" of Anderson's associates, including "working people, neighbors, business associates, things like that," said Rizzo, a 30-year veteran as a private eye.
In approaching Anderson, Rizzo posed as an independent TV producer and claimed to be working on a documentary about the Clyde case. Rizzo convinced Anderson to turn over nearly 400 pages of documentary evidence. Rizzo said he then briefed Hyde on what Anderson knew.
Rizzo told me that he found Anderson knowledgeable about the facts of the Clyde case and apparently motivated simply by outrage over the cost to taxpayers. When I asked Rizzo if he had debunked any of Anderson's information, Rizzo answered, "No, not really."
By 1996, the ex-Clyde directors were seeking to settle with the RTC, but Hyde refused to negotiate. "It appears that the lawsuit will be dismissed as a result of negotiations among parties other than myself," Hyde said. "I have not agreed to nor will I agree to make any payment in settlement of this case."
In 1997, when Clyde's other 11 directors agreed to pay $850,000, they, in effect, picked up Hyde's share. Some of Hyde's supporters have cited that result as vindication of Hyde's innocence.
But one former Clyde board member, who spoke on condition of anonymity, said Hyde only escaped paying his share because of his high standing in Congress.
"Of course, I didn't think it was fair," said the board member, who insisted he felt no animosity toward Hyde. "Obviously, I think we should have all paid and I don't know how he got away with it. ... I understood that if I tried to do it the way he did, I would still be in court fighting."
The former board member noted that some of the board members who did contribute to the settlement were retired and living on fixed incomes. "It was really tough on them," the board member said.
avoiding his share of the settlement, Hyde
solicited donations from political backers to cover the
more than $60,000 in legal fees resulting from the Clyde
S&L flap. [WP, July 31, 1997]
Todd, the former Federal Reserve official, called Hyde's avoidance of any payment "an eyebrow raiser" which was unfair to both the other directors and the investigators who uncovered the wrongdoing inside Clyde S&L. "If you were a line staffer at the FDIC [Federal Deposit Insurance Corp.], you might say, 'I busted my hump to get us where we are today and look how my superiors are selling me out for obvious short-term political motives in Washington.' ...
"It is inappropriate of a chair of Judiciary Committee to have the conflict he then had and then to continue to serve as chair of Judiciary. ... He should have walked away from it [the conflict]."
Todd also objected to Hyde's moral posturing during the Clinton impeachment proceedings. "I must say some of the rhetoric has been hard to take. There are rhetorical inconsistencies with this 'no man is above the law' thing."
In October 1998, when The Chicago Tribune got wind of Rizzo's undercover investigation of Anderson, the newspaper asked Hyde about Rizzo. The Judiciary Committee chairman acknowledged that he had been "apprised" of Rizzo's findings, but insisted that a "friend" had paid for and directed the investigation. When asked for the friend's name, Hyde pleaded a bad memory. [CT, Oct. 18, 1998]
Since Rizzo estimated that he would normally charge about $10,000 for such an investigation, the Congressional Accountability Project reacted to Hyde's "friend" story by demanding an ethics inquiry to determine if Rizzo's fee amounted to an unreported gift.
Facing that challenge, Hyde immediately altered his explanation. His office announced that Hyde's lawyer James Schirott had hired Rizzo for a $2,000 fee and that Hyde had reimbursed the lawyer.
Schirott said he hired Rizzo because Anderson was slandering Hyde over the Clyde S&L failure. No one explained the gap between Hyde's $2,000 reimbursement and Rizzo's normal $10,000 fee.
Anderson was not mollified by the new explanation. "If I was libeling Hyde," Anderson said, "he should sue me in court, not have somebody pose as a journalist to investigate me and everybody I know."
Ironically, several of the 81 impeachment-related questions which Hyde's committee has sent to Clinton demand that the president "admit or deny" knowing about the possible use of private investigators to "gather information about witnesses or potential witnesses" in impeachment-related cases.
Chairman Hyde seems to recognize that it is important to demonstrate that the president is not above the law; that the president should not escape responsibility for his actions; that the president should not lie; and that the president should not investigate critics.
Those principles, however, apparently do not apply to Henry Hyde.
Albion Monitor December 5, 1998 (http://www.monitor.net/monitor)
All Rights Reserved.
Contact firstname.lastname@example.org for permission to use in any format.
All Rights Reserved.
Contact email@example.com for permission to use in any format.