White House contacts with Treasury/RTC officials about "Whitewater"-related matters : hearing before the Committee on Banking, Finance, and Urban Affairs, House of Representatives, One Hundred Third Congress, second session, July 26, 1994

234 Pages·1994·7.5 MB·English

by  United States. Congress. House. Committee on Banking, Finance, and Urban Affairs

WHITE HOUSE CONTACTS WITH
TREASURY/RTC
OmCIALS ABOUT "WHnT:WATER"-REU1ID
MATTERS-PART 5
Y 4. B 22/1:103-160
Hhite House Contracts Uith Treasury. . .
HEARING
BEFORE THE
COMMITTEE ON FINANCE AND
BANKING,
URBAN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
AUGUST 5, 1994
Printed for the use of the Committee on Banking, Finance and Urban Affairs
Serial No. 103-160
FEB 2
1 1995
U.S. GOVERNMENT PRINTING OFFICE
81-979CC WASHINGTON : 1994
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402
ISBN 0-16-046476-5

WHITI HOUSE CONTACTS WITH TREASURY/RTC
OmCIALS ABOUT "WHITEWATER"-RELATED
MATTERS-PART 5
Y 4. B 22/1:103-160
Uhite House Contracts Uith Treasupg...
HEARING
BEFORE THE
COMMITTEE ON FINANCE AND
BANKING,
URBAN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
AUGUST 1994
5,
Printed for the use ofthe Committee on Banking, Finance and Urban Affairs
Serial No. lOS-160
FEB 2
1 )995
U.S. GOVERNMENT PRINTING OFFICE
81-979CC WASHINGTON : 1994
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDocuments.CongressionalSalesOffice.Washington,DC 20402
ISBN 0-16-046476-5
HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS
HENRY B. GONZALEZ, Texas, Chairman
STEPHEN L. NEAL, North Carolina JAMES A. LEACH, Iowa
JOHNJ. LaFALCE, New York BILL McCOLLUM, Florida
BRUCE F. VENTO, Minnesota MARGE ROUKEMA, New Jersey
CHARLES E. SCHUMER, New York DOUG BEREUTER, Nebraska
BARNEY FRANK, Massachusette THOMAS J. RIDGE, Pennsylvania
PAUL E. KANJORSKI, Pennsylvania TOBY ROTH, Wisconsin
JOSEPH P. KENNEDY II, Massachusetts ALFRED A. (AL) McCANDLESS, California
FLOYD H. FLAKE, New York RICHARD H. BAKER, Louisiana
KWEISI MFUME, Maryland JIM NUSSLE, Iowa
MAXINE WATERS, California CRAIG THOMAS, Wyoming
LARRY LaROCCO. Idaho SAM JOHNSON, Texas
BILL ORTON, Utah DEBORAH PRYCE, Ohio
JIM BACCHUS, Florida JOHN LINDER, Georgia
HERBERT C. KLEIN, New Jersey JOE KNOLLENBERG, Michigan
CAROLYN B. MALONEY, New York RICK LAZIO, New York
PETER DEUTSCH, Florida ROD GRAMS, Minnesota
LUIS V. GUTIERREZ, Illinois SPENCER BACHUS, Alabama
BOBBY L. RUSH, Ilhnois MIKE HUFFINGTON, California
LUCILLE ROYBAI^ALLARD, California MICHAEL CASTLE, Delaware
THOMAS M. BARRETT, Wisconsin PETER KING, New York
ELIZABETH FURSE, Oregon
NYDIA M. VELAZQUEZ, New York BERNARD SANDERS, Vermont
ALBERT R. WYNN, Maryland
CLEO FIELDS, Louisiana
MELVIN WATT, North Carolina
MAURICE HINCHEY, New York
CALVIN M. DOOLEY, California
RON KLINK, Pennsylvania ,
ERIC FINGERHUT. Ohio
(II)
CONTENTS
Page
Hearingheldon:
August 5, 1994 1
Appendix:
August 5, 1994 93
WITNESSES
Friday, August 5, 1994
Breslaw, April A., Counsel, Professional Liability Section, Resolution Trust
Corporation 8
Katsanos, Stephen, ResolutionTrust Corporation 10
Kulka, Ellen, General Counsel, ResolutionTrust Corporation 5
Roelle, William, Deputy to the Director, Federal Deposit Insurance Corpora-
tion, andFormerSeniorVice President, Resolution Trust Corporation 8
Ryan, John E., ActingChiefExecutive Officer, Resolution Trust Corporation .. 3
APPENDIX
Prepared statements:
Gonzalez, Hon. Henry B 94
Breslaw, AprilA 107
Kulka, Ellen 101
Ryan,JohnE 95
Additional Material Submitted for the Record
Gonzalez, Hon. Henry B.:
Letters ofinvitation to testify 119
Letter dated August 3, 1994, from Butler & Binion, lawyers for Ms.
Lewis, declininginvitation totestify at thehearing 127
Letter dated August 15, 1994, from April Breslaw clarifying redacted
notes ofMarch 25 meetingbetween Ms. Breslaw, RTC General Counsel
KuUta, andAssistant General CounselHindes 129
Letter dated August 24, 1994, from Ms. Kulka amplifying her testimony
ofAugust 5, 1994 132
Closing statement 133
Correspondence between Chairman Gonzalez and Rep. James A. Leach
regardingthe Whitewaterhearings 136
'Tool forScandal,"Harper's magazine, October 1994 192
BankingCommittee StaffMemo: "Unprecedented RTC Resources Devoted
to Madison Civil Case" 201
Letter dated September 7, 1994 from Chairman Gonzalez to Democratic
Colleagues 204
Letter dated August 24, 1994 from Glion Curtis, former Acting General
Counsel oftheRTC, to Chairman Gonzalez 212
Leach, Hon. JamesA.:
LetterdatedAugust4, 1994 fromHon. Bill Orton 214
LetterdatedAugust4, 1994, to Hon. Bill Orton 216
Letter dated February 3, 1994, to Mr. Altman re RTC investigation
ofMadison Savings and Loan failure 218
Closingstatement 221
Pryce, Hon. Deborah, copyofE-Mail memo toJohnRyan fromApril Breslaw . 227
(III)

WHITE HOUSE CONTACTS WITH
TREASURY/RTC OFFFICIALS ABOUT
"WHITEWATER"-RELATED MATTERS—PART 5
FRroAY, AUGUST 5, 1994
House of Representatives,
Committee on Banking, Finance and Urban Affairs,
Washington, DC.
The committee met, pursuant to notice, at 9:32 a.m., in room
2128, Rayburn House Oflfice Building, Hon. Henry B. Gonzalez
[chairman ofthe committee] presiding.
Present: Chairman Gonzalez, Representatives Neal, LaFalce,
Vento, Frank, Kanjorski, Kennedy, Waters, LaRocco, Orton, Bac-
chus of Florida, Klein, Maloney, Deutsch, Gutierrez, Roybal-Allard,
Barrett, Furse, Wynn, Fields, Watt, Hinchey, Fingerhut, Leach,
McCollum, Roukema, Bereuter, Ridge, Roth, McCandless, Nussle,
Thomas, Johnson, Pryce, Linder, Knollenberg, Lazio, Grams,
Bachus ofAlabama, Huffington, Castle, and King.
The Chairman. The committee will please come to order.
Good morning.
The panel and beloved brethren, as they used to say in my
church, the hearing today is the fifth hearing on the completed
phase of the independent counsel's investigation into the so-called
Whitewater affair.
Our witnesses today are from the Resolution Trust Corporation.
And I want to thank them at the very outset for their cooperation,
not only in immediately replying and acceding to our request to ap-
pear, but their invaluable help and assistance to the staff in the
preparatory work. They will address what they know of the con-
tacts between the Treasury, the White House, and the RTC regard-
ing the so-called Whitewater affair, whatever phase that is applica-
ble to the call ofour House-passed resolution.
A major claim has been, the Madison Guaranty Savings and
Loan got some kind of special treatment; namely, that the White
House tried to slow down or somehow thwart civil and criminal in-
vestigations, and the fact is that nothing could be further from the
truth. The RTC devoted more energy and resources to investigating
Madison than any other institution. Banks with billion dollar asset
losses were not scrutinized as much as Madison. The multiple in-
vestigation and this committee's hearings have shown one Repub-
lican charge after another to be baseless, exaggerated, or distorted.
Witness after witness show that none of the Treasury-White
House-RTC contacts were illegal, to boot, and add other investiga-
(1)
tions, including the special counsel, who has a grand jury as an ad-
junct help.
None ofthese contacts were unethical and this is according again
to three other investi—gations, including witness after witness, docu-
ment af—ter document and our staffhas reviewed thousands ofdoc-
uments that show nothing was done wrong bv the administration.
Was there regulatory misconduct? Well, if the fervent zeal to in-
vestigate Madison is misconduct. Was there an effort to thwart any
investigation? Today's witnesses will address that question.
And with that, I will recognize Mr. Leach.
Mr. Leach. Mr, Chairman, the minority has no opening state-
ment, but as previously agreed, will be allowed a closing statement.
We welcome the witnesses before us, and I am pleased to meet
some ofyou whom I have never met before.
Mr. Chairman, if I could request unanimous consent to place in
the record some correspondence between myself and the Treasury
on the recusal issue of Mr. Altman, as well as place in the record
a letter that I have recently written to a colleague in the House.
[The correspondence referred to can be found in the appendix.]
The Chairman. Now, I want to say to the witnesses that today
we will be, of course, conducting the hearing under rule X of our
rules of the House and committee and will therefore be swearing
vou in as we recognize you, which has been the practice in these
hearings.
Now, I want to point out, as I have previously, that none of the
witnesses are accused of any wrongdoing nor are they under the
shadow ofany inference ofwrongdoing or misdeed ofany kind. And
again and again, I must point out that this committee is not ajudi-
cial body. It is not a court. And it is not a prosecutorial body. That
has already been referred to special counsel, and now I think he
has been designated special prosecutor.
And I must keep saying that because apparently even those per-
sons that are supposed to be reporting from a knowledgeable and
experienced standpoint the proceedings of this body have failed to
grasp this very significant and fundamental point. Therefore, no
one should infer any negative idea to the fact that the witnesses
are being asked to take an oath under other procedures. It is a
practice that has been adopted and has been incorporated, as I say
and repeat, in rule X.
So unless there is a witness that has some kind of time problem
or constraint, we will try to handle the requests as best as we can,
and then in light of the consensus, we will try to accommodate.
Otherwise, I will recognize you from my left to the right and ask
Mr. Hindes to be the first witness and ask you to stand and raise
your right hand.
[Witness sworn.]
The Chairman. The—gentleman may proceed. —
The staff tells me and I wasn't aware of this that the wit-
nesses have expressed a desire that Mr. Ryan be recognized first,
and I can see the reason for that. I was just proceeding under the
basis that we have done so often before that it is automatic reflex.
So pardon me, Mr. Ryan, but I think that desire is very fitting
and proper. So we will recognize you first and ask you to stand.
[Witness sworn.]
TESTIMONY OF JOHNE. RYAN, ACTING CHIEF EXECUTIVE
OFFICER, RESOLUTION TRUST CORPORATION
Mr. Ryan. Mr. Chairman, members of the committee, my name
is Jack Ryan. I am the Deputy and Acting CEO of the RTC. I be-
came Deputy CEO on January 4 of this year and assumed the role
ofActing CEO on March 30, 1994.
I am a career regulator with over 30 years' experience as a senior
regulatory official with the Federal Reserve Board and, more re-
cently, with the Office of Thrift Supervision where I have served
as the Director ofthe southeast region ofthe Office ofThrift Super-
vision since October 1989.
Over the course of my career, I have helped deal with and man-
age many of the financial crises that have occurred in the United
States during the past 20 years, including Continental Illinois,
Penn Square, the foreign debt problem, and the savings and loan
crisis, to name a few.
CEO
Last December, I agreed to serve temporarily as Deputy of
the RTC until a permanent CEO could be nominated and con-
firmed. When I agreed to the temporary assignment, it was my un-
derstanding that the process of selecting a permanent CEO was
well under way, and I anticipated my tenure would be limited to
a matter of a few weeks. Obviously, that expectation turned out to
be incorrect and myjob has now expanded to Acting CEO.
As ofthis moment, I have no idea what the current status of the
selection of a permanent CEO is, nor do I know how much longer
I will have this responsibility. As I have repeatedly told the RTC
staff, I will continue to discharge my responsibilities, including
those related to Madison Guaranty, as though I was the permanent
CEO, and to the best ofmy ability.
The RTC is fully cooperating with this committee in the conduct
of these hearings. The RTC has provided the information and data
requested by this committee and has made staff available for testi-
mony. The RTC is also cooperating fully with Special Counsel
Fiske, the Senate Banking Committee, the Treasury Office of the
Inspector General, the RTC Office of the Inspector General, the
General Accounting Office, and the Office of Government Ethics in
their investigations ofvarious aspects ofthis matter.
During my interview before counsel for the Senate committee
and before Special Counsel Fiske, I have been asked a number of
questions most of which fell into the following categories: One, how
I came to be selected for this job; two, my authority as Deputy
CEO, which was the position I held when most of the events that
are the subject of this hearing occurred; three, my relationship
with Mr. Altman and the administration; four, my knowledge of
and/or participation in the TreasuryAVhite House contacts; five,
whether I was ever instructed or pressured by Treasury or the
White House to influence the investigation or the outcome of the
investigation into Madison Guaranty Savings and Loan; and six,
whether I have done anything to impede or change the results of
the RTC's investigation; for example, did I tell the RTC staff I pre-
ferred a finding that Whitewater did not cause a loss to Madison.
I will now cover for the record a summary of my responses to
these questions.
I received a phone call in December 1993 while I was in Atlanta
with the OTS from Frank Newman, Under Secretary of the Treas-
ury, whom I had known professionally when he was with Bank of
America and I was with the Federal Reserve. Mr. Newman's call
came not long after the nomination of Stanley Tate as CEO had
been withdrawn, and he asked if I would consider a temporary as-
signment at the RTC.
I traveled to Washington for two interviews, one with Mr. Alt-
man and one with Secretary Bentsen. These interviews were the
first time I had ever met eitner Mr. Altman or Mr. Bentsen. I don't
believe the subject of Madison Guaranty came up during these
interviews as most of the discussions dealt with morale problems
at the RTC and what could be done about them.
At those interviews, I agreed to serve as Deputy CEO of the
RTC.
The position of Deputy CEO is a statutory one enacted in the
RTC Completion Act. There was no Deputy CEO before me and, as
a result, the existing RTC organizational structure and delegations
of authority did not provide for one when I arrived. In fact, some
of the senior officials of the corporation, by law, reported directly
to the CEO. The lack of clear authority in the RTC's corporate
structure, together with the temporary nature of my appointment,
and the fact that the Deputy Secretary of the Treasury remained
CEO created a very challenging environment in which to assume
operating responsibility.
Obviously, much of my time in the early days was spent trying
to gain an understanding and some control over an organization
that is surprisingly decentralized with functional units operating
independently of each other. The precise decisionmaking respon-
sibility is not only difficult to explain under these circumstances,
but my observation is that it was often not clear to those working
at the RTC as well.
During my tenure as Deputy CEO, I reported to Mr. Alt-
man who was the Interim CEO. It should be ndoitreedctltyhat Mr. Alt-
man essentially withdrew from active RTC management following
the February 24 Senate —Banking Committee's RTC's Semiannual
Oversight Board meeting Board hearing, some 7 weeks after my
arrival. During the period preceding the hearing, regular weekly
meetings were scheduled to discuss RTC matters, but due to Mr.
Altmans busy schedule, many of these meetings actually never
took place. The subject of Madison Guaranty came up three or four
times during these meetings. The discussions were procedural, and
I am quite certain that the substance of the allegations was not
discussed.
Let me note that Mr. Altman's instructions to me and the other
RTC staff always was to deal with Madison Guaranty the same as
the RTC would deal with any other similar organization.
Regarding the meetings and/or contacts between Treasury and
the White House, I first learned of the February 2 White House
meeting in Mr. Altman's office during a question and answer ses-
sion being held to prepare for the February 24 hearing before the
Senate Banking Committee. I had no prior knowledge ofthat meet-
ing and was unaware ofany other contacts until I read about them
in the press.