First cycle of Whitewater wash starts: Congress told that Whitewater showed only bad judgement

AS CONGRESS opened fiercely partisan hearings into the Whitewater affair, White House Counsel Lloyd Cutler yesterday insisted that White House and Treasury officials showed bad judgement, but nothing worse, in their contacts over the failed Madison Guaranty savings bank at the heart of the controversy.

Addressing the House Banking Committee, Mr Cutler firmly denied Republican suggestions that the officials had tried to influence a probe by the Resolution Trust Corporation, the Treasury-controlled regulatory agency, into Madison. Among the audience in the woodpanelled hearing room was Jim McDougal, owner of Madison and co-partner with the Clintons in the Whitewater real estate venture.

Mr Cutler acknowledged there had been much loose talk at the White House, 'too many people having too many discussions about too many sensitive matters' which should have been left to the White House counsel's office. But 'nothing happened as a result of the contacts. They had no impact on the real world of RTC activity.'

Mr Cutler's testimony marks only the beginning of what could be months of on- and-off hearings on Capitol Hill into the Whitewater affair, parts of which are still under investigation by the special prosecutor, Robert Fiske. In PR terms, it could be critical.

A venerable Washington insider and one-time counsel to President Jimmy Carter, Mr Cutler, 76, only returned to the White House in March as Mr Clinton cast around for an experienced figure to contain a controversy which had forced the resignation of former Counsel Bernard Nussbaum and threatened to consume both himself and the entire administration.

'I am not a special pleader for the President of the United States, I did not ask for this job,' he told a Republican questioner, adding that he had issued a set of guidelines to ensure that any future contacts between the White House and law enforcement agencies would be 'beyond reasonable challenge'.

Challenge, however, was the watchword for the Republican minority on the committee, led by Iowa Congressman Jim Leach. Whitewater, said Mr Leach, was not Watergate, it was a mere 'bump on the landscape of political scandal'. But its handling was a case study in the 'arrogance of power'.

On a strict party line vote the committee's Democrat majority beat off a Republican attempt to extend the hearing to cover the 1993 suicide of the White House deputy counsel, Vincent Foster. As a result, this first phase of hearings will be confined to the White House-Treasury contacts.