Madison Guaranty was a savings and loan association founded by the Clinton family in Arkansas. It was established in 1979.
The association's early years were marked by significant losses, with the company reporting a $10 million loss in 1983.
Madison Guaranty's financial struggles were largely due to its aggressive lending practices, which included making high-risk loans to developers. These loans were often secured by properties that were not worth the amount loaned.
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Open Up
The curious saga of Madison Guaranty just won't go away. Much like a puzzle, each new detail adds to an already unflattering portrait of the cozy relationship between money and politics in Arkansas.
President Clinton's dealings with James McDougal, the owner of Madison Guaranty, are a prime example of this. McDougal helped the Clintons repay a $50,000 personal debt, just when he needed favorable treatment from state banking officials to stay in business.
This isn't an "old" story that has no relevance to Mr. Clinton or his present job. Every time the White House dodges inquiries about the old days in Arkansas, reasonable people begin to wonder about a cover-up and Mr. Clinton's sincerity.
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The matter clearly needs ventilating, and if the White House won't do it, two other institutions can. The Justice Department is already looking into transactions at Madison, and the House Banking Committee is considering a full investigation to frame new rules to prevent future banking disasters.
Madison Guaranty was a "private piggy bank" for its owners and their influential Arkansas friends, making dubious real estate investments and large unsecured loans to executives and other insiders.
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Investigation
The investigation into Madison Guaranty Savings and Loan Association's collapse was a long and complex process. It involved multiple government agencies and took several years to complete.
The Office of Thrift Supervision (OTS) was responsible for regulating Madison Guaranty, but it failed to detect the massive losses and accounting irregularities that led to the thrift's demise.
The OTS was criticized for its lax oversight and failure to enforce regulations. The agency's inaction allowed Madison Guaranty to continue operating despite its obvious financial difficulties.
The OTS's inspector general found that the agency had a culture of complacency and a lack of accountability. This led to a failure to identify and address the problems at Madison Guaranty.
The OTS's failure to regulate Madison Guaranty was not an isolated incident. The agency had a history of poor oversight and a lack of enforcement action against troubled thrifts.
The investigation into Madison Guaranty's collapse ultimately led to changes in the way that thrifts are regulated and supervised.
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