Treasury's Whitewater Whirlpool

It began as a Republican assault on the Oval Office. But increasingly, it appears that the main casualties of GOP-inspired congressional hearings into the Whitewater affair will be the occupants of 1500 Pennsylvania Avenue, stately home of the U.S. Treasury Dept.

Inquiries by the House and Senate Banking Committees won't turn to Treasury aides' roles in Whitewater until early August. But already, it's clear the department has been rocked by the scandal. No matter what happens on Capitol Hill, insiders expect big personnel shifts at Treasury this fall.

BUSY AGENDA. To understand why, consider the intrigue swirling around the department. Secretary Lloyd M. Bentsen contends he was unaware of subordinates' questionable activities--a claim one aide disputes. Deputy Secretary Roger C. Altman, who kept the White House abreast of Whitewater developments when he served as acting head of the Resolution Trust Corp., has seen his version of events contradicted by co-workers. General Counsel Jean Hanson and Bentsen Chief of Staff Joshua L. Steiner have produced documents suggesting that Altman was an early and active participant in White House damage control.

Although Special Counsel Robert B. Fiske Jr. feels that the scurryings of Treasury aides do not warrant criminal prosecution, White House Chief Counsel Lloyd N. Cutler told the House Banking Committee on July 26 that some of those contacts--notably Altman's discussion with White House aides of his recusal from the case--showed poor judgment.

And judgment is highly prized at Treasury, which cherishes its reputation as a buttoned-down bastion of prudence. With its high command mired in Whitewater claims and counterclaims, the department seems adrift--even as lobbying for a new General Agreement on Tariffs & Trade intensifies, the dollar remains shaky, and legislation easing barriers to interstate banking nears passage. Treasury is "an agency that's paralyzed," says an Administration economist. "Nothing is getting done."

Although Treasury no longer wields the clout it enjoyed under Republicans--due in part to President Clinton's creation of a National Economic Council (NEC) in the White House--it remains central to efforts to boost U.S. competitiveness. Observers doubt it can be effective while it's under a Whitewater cloud. "Treasury has been severely damaged," laments a former high-ranking department official. "The place is going to have to be rebuilt."

Few congressional sources believe that Bentsen's standing has suffered. "They still love Lloyd on the Hill," says a Clinton economic aide. The same cannot be said of Altman, whose ability to hang on to his job looks increasingly in doubt. Although he elicited a terse expression of Presidential support on July 25, many Clintonites believe his effectiveness is beyond repair. "Altman is trying to save his hide even as the White House distances itself from him," says a Presidential adviser. "The Clintons won't forgive him for leaking stuff that fingered [White House aides] George [R. Stephanopoulos] and Harold [C. Ickes]. He must go, and he will go." Altman's response: "As far as taking a fall is concerned...I don't expect to resign."

DEAR DIARY. Another likely casualty is Steiner, whose diary notations threaten to cut the bottom out of Altman's defense. The betting is that the 28-year-old aide departs Treasury for a less visible job. As for Hanson, few Clinton aides think she can patch up matters with Bentsen. One bone of contention: a Hanson memo that tried to get the Treasury chief to admit he understated his knowledge of Whitewater. "Jean would have to resign on her own," reckons a top Clintonite. "Any move to remove her would look like retribution."

Should Treasury aides begin an exodus, who would fill their wingtips? Typically, the speculation has begun even before the bodies have departed--or delivered their congressional testimony. In-house favorites for Altman's job include W. Bowman Cutter, deputy to NEC honcho Robert E. Rubin, and Erskine B. Bowles, head of the Small Business Administration. Other insiders: Joan E. Spero, Under Secretary for Economic Affairs at the State Dept., and top Commerce official Jeffrey E. Garten, an ex-colleague of Altman at Blackstone Group. Outsiders include C. Fred Bergsten, director of the Institute for International Economics and a Treasury official in the Carter Administration.

Long-term, some Democratic strategists expect that the Treasury turmoil might even strengthen Bentsen's role within the Administration. Noting that most of his top deputies, from Altman and Hanson to Under Secretary for International Affairs Lawrence H. Summers, were White House suggestions, one Clinton adviser says that a restructuring might be just the ticket. "The plan was always for Bentsen to depart at some point and for Rubin to step in. Now, Lloyd might just dig in and try to rebuild Treasury with his own people."

Could such a sunny outcome evolve from the dank mess? Stranger things have happened in Washington. Meanwhile, it looks as if Bentsen had better be prepared to exchange his pinstripes for overalls. It's time for a reconstruction at a proud institution weakened by political meddling and palace intrigue.


LLOYD BENTSEN His conservative views have clashed with those of White House liberals. Now, Bentsen's claim that he was out of the loop on Whitewater has been challenged.

ROGER ALTMAN The Republicans' chief target in the Whitewater hearings. As acting head of the Resolution Trust Corp., Altman aided White House attempts to limit political fallout from the scandal.

JEAN HANSON A political neophyte, Treasury's general counsel threatens to drag Altman and Bentsen deeper into Whitewater. She has produced documents suggesting that both lied about their involvement.

JOSH STEINER Bentsen's chief of staff dismayed Altman and White House aides by giving congressional investigators his diary detailing their struggle to keep a lid on Whitewater political damage.

Before it's here, it's on the Bloomberg Terminal.