Is Little Rock corrupting Washington? C'mon.

• Author: Meacham, Jon
• Position: Political scandals before President Clinton - Cover Story

Increasingly, there is a sense in Washington that the Arkansas political culture does not work in the White House.... Little Rock culture was rooted in an informal way of doing business, in which behind-the-scenes relationships played at least as large a role as the evident formal structure of power.

Washington is simply shocked--shocked--at the loose morals the upstart crowd from the South has brought to the capital. On "Inside Washington," National Public Radio's Nina Totenberg sighed this spring, "Everybody scratches everybody's back in Little Rock. It's a tiny little community. It's not the same."

Not the same as Washington? The rap against Little Rock is that everybody seems so cozy--politicians, lawyers, and businessmen grow up together, go to school together, marry each other, and then move in the same circles. On "Washington Week in Review," Newsweek's Howard Fineman said, "Arkansas is the kind of big and basically poor state where maybe 200 people run the whole show. They have the money. They've got the power. They're on a first-name basis with each other. Most of them work in downtown Little Rock within about a mile of each other. They all go to the Little Rock Country Club and the bar at the Capital Hilton.... and the line between public money and private business is very fuzzy." The New York Times editorialized, "[T]he genius of the Federal system does not reside in importing to Washington the faults and idiosyncrasies of the state capitals."

But the enormous irony in assuming Little Rock is corrupting the national capital is this: If the Arkansans ever needed a how-to guide on operating in an ethical twilight, they would look to Washington, not Baton Rouge or Atlanta. Washington has long been home to apparent conflicts of interest, lawyer overbilling, sweetheart deals, and scheming political spouses. "There are three things in life," Edward Bennett Williams, the consummate Washington lawyer, used to say. "Money, power, and public relations."

That is Washington's creed. So even though Whitewater will inevitably fall off the radar screen (there are already signs of that happening) Washington's patronizing disdain for Southern clubbiness--and the appearance of possible conflicts in two-career marriages--is laughable coming from pundits like Fineman, whose wife, Amy Nathan, practices with Akin Gump, a well-connected, socially important law firm that has a very permeable wall between lawyering and lobbying. Its leading lights include veteran fixers Vernon Jordan and Robert Strauss, and, until last year, Ruth Harkin, the wife of Senator Tom Harkin. CBS White House correspondent Rita Braver is married to Robert Barnett, a Washington lawyer who has done personal work for the Clintons. Congressman John Dingell of Michigan watches out for the interests of the Detroit automakers, most recently derailing legislation that would have required more energy-efficient vehicles, and is married to a General Motors executive. Sounds a lot like what the press is calling "incestuous" in Little Rock, doesn't it?

Take a hard look at what the Washington media say about the Clintonites and you cannot escape the not-so-subtle disparaging message--a cultural dismissiveness that says, Oh, what else can you expect from a crowd of hillbillies? Of course, this does not excuse the Clintonites for things they may have done wrong in Arkansas or in Washington. Nor are all Washingtonians who are connected to other Washingtonians crude influence peddlers. Many coincidences of blood, marriage, and career are just that--coincidences. But journalists are forgetting--or, worse, simply not noting--that the back-scratching arts the Clintons are accused of importing from down South have been practiced here with unmatched skill for years. This makes the press' condescension both a historical and hypocritical--and the more Washingtonians get away with assuming the capital's ethical murkiness is due to the Arkansas invasion, the less they have to examine their own sins.

* Washington assumption: Before the Clintons arrived from Dogpatch, official Washington was a sophisticated, ethical nirvana.

In The Wall Street Journal, Paul Gigot wrote this spring, "Far from shedding the Arkansas political culture, the Clintons have brought it with them, complete with cronies, a mind-set for cutting ethical corners, and the arrogance that often comes from governing a one-party state."

But a case study in how Washington insiders conducted themselves long before the Arkansans showed up--and in how the press is cowed largely into silence by Beltway satraps, Democrat or Republican--unfolded when George Bush named his old friend James Baker secretary of State in 1988. Nobody in the eighties was more inside-Washington than Baker, so if Washington insiderdom is automatically held in higher ethical regard than Southern mores, we are in real trouble.

Consider this sequence of events, as reconstructed by The Washington Post's Walter Pincus in 1989: When Baker became Reagan's chief of staff in 1981, he owned $3.5 million worth of stock in Texas Commerce Bancshares Inc., which rose in value to $4.2 million by 1985, the year he switched jobs with Donald Regan to become secretary of the Treasury. The stock was held in a "qualified blind trust," which meant Baker knew what he owned, though not the current size of the asset. He refused himself from Texas Commerce's direct affairs, but nevertheless was dramatically involved--as a Treasury secretary would be--in general banking matters, including testifying in favor of legislation that made interstate banking mergers easier.

In May 1987, Chemical Bank of New York took over Texas Commerce under those new laws in what was, at the time, an unprecedented banking merger. The deal had to be approved by the Federal Reserve Board, and parts of it had to pass muster by two federal officers who had been appointed by then-Secretary of the Treasury James Baker: the comptroller of the currency, Robert L. Clarke, a Houston friend and political ally of Baker's, and FDIC chairman William Seidman, with whom Baker had served in the Ford administration. Both approved.

Meanwhile, Baker continued to be active in Third World debt issues while he was a knowing stockholder in Chemical, the third-largest U.S. lender to those countries, with $4.5 billion in outstanding loans. For example, in a 1987 meeting with the Brazilian finance minister, who was at the time urging Third World debtors to default, Baker strongly urged the opposite course--which obviously advanced the interests of debt-holders, especially Chemical. Yet during the Reagan administration, no reporter ever pointed out Baker's ownership of the bank stock, and he never mentioned it in his confirmation hearings for the job at either State or Treasury, although the subject of Third World debt came up at both.

According to people familiar with the situation, after the '88 election, Baker sent an intermediary to ask Boyden Gray, whom Bush had put in charge of ethics decisions for the transition, whether Baker could continue to hold the bank stock. (In 1988, a new Justice Department ruling required such a waiver for any holding that might pose an appearance of a conflict of interest, effectively changing the rules under which Baker had been playing in the Reagan administration.) Gray indicated that he would not waive the rule and would probably ask Baker to sell the stock.

At that point, Baker, a master political infighter, swung into action. Baker's camp apparently tipped off The New York Times, William Safire to the fact that Gray, while serving as counselor to Vice President Bush, had been paid as much as $50,000 a year to serve as chairman of his family's $500 million communications company. As a vice presidential aide, what Gray did was legal, but would have been barred if Gray had worked for the president. (The Bakerites were probably gambling that the distinction would be buried, still embarrassing Gray and shutting him up about Baker's holdings.) Nevertheless, it was a sexy story: the ethics czar with an ethical problem of his own. The Times was reportedly planning a Sunday story by investigative reporter Jeff Gerth, then a Monday morning column by Safire. But in February, on the Friday before the...