The Backwoods of Banking: From Capitalist Whitewater to Socialist Land Trusts
Near Flippin, Arkansas in the Ozark Mountains, the beauty of the woodlands inspired Jim and Susan McDougal to purchase 220-acres for vacation real estate in 1978 under the Whitewater Development Corporation. They partnered with another couple: Bill Clinton, who was an attorney general of Arkansas, and Hillary Clinton, a Rose Law Firm attorney at the time. The couples borrowed $200,000 dollars from Citizens Bank and an additional, yet undisclosed, $20,000. After Mr. Clinton was elected Governor of Arkansas later that same year, the Whitewater Development Company commenced its operations in 1979. The following year, Mr. McDougal purchased Madison Guaranty Savings and Loan in 1980.
The land was remote and remained undeveloped until Ms. Clinton borrowed $30,000 from McDougal’s Madison Guaranty to begin construction of Whitewater’s first model home. In 1985, McDougal expanded his development to Castle Grande, which Ms. Clinton provided legal advice.
During the same decade, in an equally rural setting but on a different waterfront, Bernie Sanders, the former Mayor of Burlington, Vermont, was also invested in the business of real estate. A referendum on housing affordability did not pass in 1982, which compelled subsequent plans to create alternative housing for low-income families. Community land trusts (CLT’s) became a viable solution in Burlington. CLT’s are funded by public and philanthropic donors, and land is set aside for affordable houses or apartments, which are built or repurposed. Both the house and the land underneath the house are purchased while the CLT holds permanent ownerships over both. The housing remains affordable through equity and permanent ownership of the CLT, which guards against skyrocketing interest rates. When a family in a CLT sells their home, they earn part of the modest increase of the property, yet the house is still affordable for the next family because of CLT guardianship. Two years later, in 1984, Burlington secured a $200,000 grant and a loan from its pension fund that Burlington Savings Bank and the U.S. Department of Housing and Urban Development matched. These initial steps were crucial in creating affordable housing in Burlington, Vermont by Lake Champlain.
In 1986, federal regulators were entrenched in a whole different type of real estate venture. All of McDougal’s funds for Whitewater were traced back to McDougal’s Madison Guaranty. Federal regulators found the entire venture a fraud. Jim McDougal was forced to step down from Madison Guaranty, and Ms. Clinton of Rose Law Firm ended the legal retainer with McDougal as the bank neared collapse. Citizens Bank, where they initially acquired loans for their Whitewater venture, was foreclosed and became 1st Ozark National Bank in 1986. Ms. Clinton assumed primary control over the loan from Madison-turned-1st Ozark Bank. As Governor of Arkansas, Mr. Clinton expanded branch banking after signing a bill that would directly benefit Twin City Bank that was the parent of 1st Ozark Bank.
Events took a turn for the worse as Castle Grande went bankrupt in 1989 and caused a coinciding collapse of Madison Guaranty. Federal regulators had to take over, and the bailout cost the United States $60 million.
Much changed during the course of investigations: Bill Clinton was inaugurated into presidency. On January 26, 1996, Hillary Clinton fulfilled a subpoena to testify before a grand jury, which has never happened to a First Lady in American history. She testified that her involvement in Whitewater was minimal: she never borrowed nor asked someone else to borrow money from a bank. The Clintons walked away and never looked back while the others tied to Whitewater were convicted, including the McDougals. Bill Clinton was not quick to forget his old friends. During his last moments of presidency, he pardoned some of those involved.
Meanwhile in Utopic Vermont…
In 1988, with a minor property tax increase in Burlington, plans came to fruition with the Burlington Housing Trust Fund, now called The Champlain Housing Trust. However, there were reservations.
Tim McKenzie, the founding land trust board member, recounted to Slate that Mayor Sanders did not fret about how conservatives may respond to their tax dollars going toward another person’s home. McKenzie notes that the Mayor worried about the underdog: “equity growth by community land trust homeowners is limited due to resale restrictions.” Eventually, Sanders came around and recognized “it’s a better deal than renting.”
Honoured by the National Community Land Trust Network in 2012, Sanders recalled this first municipally funded community land trust in the nation as one of his proudest moments as former Mayor of Burlington. Although it was, and still is, an unpopular and uncommon venture, it is now the largest of its type in America.
Sanders continued to support inspired affordable housing proposals on city and state levels. He earmarked CLT funds for properties with permanent affordability provisions to guarantee money toward the trust’s capital. The land trust’s current chief executive officer, Brenda Torpy, approximates that 15% of Burlington’s rental housing is removed from the market and its surmounting interest rates. The Champlain Housing Trust has expanded to three different counties.
Without Sanders backing the original plans, one could be assumed that the Champlain Housing Trust would not have been lasting. But it is certain that the U.S Department of Housing would not have secured affordable housing beyond the families who moved in first during the 1980s. Because of Sanders, there will be housing that is affordable for the next generation.
As America Watches, Two Roads Diverge
Old-fashioned, capitalistic Clinton and anti-establishment Sanders are 2016’s Democratic hopefuls. The contenders seem even more incongruous when recalling their histories. As Ms. Clinton embroiled herself in controversial cattle futures and ambitious, though risky, high-end vacation realty investments, her future competitor sowed the seeds for a more socialist venture in affordable housing benefiting those less fortunate than Clinton’s cliental. It could be argued that this was only one moment in time before Clinton’s career and its ostensible move toward progressivism. Looking back at this comparative history may even seem innocuous. However, it could be an indicator of both Clinton and Sanders’ main objectives and, even, their morals before they became steeped in their decades-long political careers. Analysing their past ideologies and decisions in isolation from current interests may reveal their core principles.
No matter how damning, the American campaign season centres itself on measuring a candidate’s morality. The art of campaigning is not a practice in smearing the next woman’s ethics but a personal maintenance of often dubious morality. It is a wolf dressed in sheepskin.
The characters of this campaign season have long histories that can contain embarrassments and, often, instances of immorality. Whether it is Ted Cruz’s lack of charisma, or Donald Trump’s comments on women and minorities, or Hillary Clinton’s pocketbook, what remains is often tactful diffusion to divert what could have been the end of their political careers. Scandalous and unfavourable headlines can just as easily be called defamation, slander, or simply irrelevant. The Whitewater scandal is a relic that conservative Hillary haters dust off and bring to light causing everyone else to roll their eyes, while Sanders’ camp tries to legitimize his robust career while disavowing Clinton’s. The depth of Clinton’s desire for wealth and power or the resilience of Sanders’ radical propositions are difficult to ascertain as truth and fiction wrestle for dominance in the media. Understanding a politician before they became who they are today may strip away their so-called sheepskin and expose what they are actually made out of.
The American home lies at the centre of campaign season as families compare their personal morals and savings with the powerful men, and woman, proclaiming they can protect their interests best. Even if there are glaring inconsistencies in nearly every candidate’s track record, they can surely redefine themselves as time eclipses the rigmarole of politics. However, as these hackneyed and incoherent histories become even more muddled as campaigns tear each other apart, the American dream of hearth and home is largely exploited as the truth voters rightly deserve is obscured. These candidates and their past real estate ventures seem like meaningless antics of a bygone era, yet could be incredibly telling of both candidates’ ideas of American life, of the American home, which is the heart of the nation. Whether it is a Democrat or Republican president, it is curious if the victor’s history will replay itself for better or for worse.
By Mariah Katz