The Clintons created a new superhighway for corruption and their cronies obliged:
The High Road to Scandal
By Michael Kelly
Wednesday, June 10, 1998; Page A25
Washington does not produce much in the way of literature, but on June 2,
a minor classic was born. The work is modestly titled "Review of
Management Practices at the Treasury Department's Community
Development Financial Institutions Fund," and it was produced by the
majority staff of the Subcommittee on General Oversight and Investigations
of the House Committee on Banking and Financial Services. Its 105 pages
of dry, spare prose comprise a perfect little parable of how corruption
works in government.
In bad Washington fiction, corruption is always purposeful and self-aware.
A cardboard figure -- let's call him Senator Bedfellow -- lines his pockets
with filthy lucre and sells out his cherished values. (The latest cliche of the
genre can be seen in Warren Beatty's "Bulworth," an attempt at big
thoughts by a man of whom it can be said: As an intellectual, he has nice
hair.) Mostly, though, Washington corruption is about people setting out to
do good, and making a few little compromises along the way.
In 1992, when Bill Clinton was running for president, he proposed to
establish a system of 100 "community development banks," which would
create credit in low-income communities. The program was to be modeled
on Chicago's South Shore Bank, which has funded the renovation of more
than 7,000 apartment units and brought entrepreneurial capital to an
impoverished neighborhood. The Clintons had long admired South Shore's
work; a college friend of Hillary Clinton's was a senior vice president at the
bank, and Clinton had encouraged South Shore's parent company,
Shorebank Corp., to open an affiliate in Arkansas.
But it turned out that bankers did not like the idea of the government
creating and funding 100 new banks. So, the first compromise: the
administration and Congress abandoned the idea of creating a new
network of banks for outsiders and instead created something much more
traditional, a new pot of money for insiders. The Community Development
Financial Institutions Fund, established as an agency in the Treasury
Department, was bankrolled with $382 million, two-thirds of which was to
be spent in matching fund grants to existing "community development
financial institutions."
In its first round of grants, in July 1996, the CDFI Fund paid out $37.2
million to 31 community development banks. Generally speaking,
government grants are given in accordance with "objective" scoring
systems designed to guard against favoritism and influence peddling. But
CDFI Fund Director Kirsten Moy and Deputy Director Steve Rohde
rejected that as overly bureaucratic, and used what Rohde later told
congressional investigators was an "unorthodox" approach, in which the
director, deputy director and eight hand-picked "outside reviewers"
selected grantees based on personal knowledge.
Following complaints that this selection process overwhelmingly favored a
small circle of well-connected players, the House Banking subcommittee
began investigating CDFI in March 1997. Investigators were especially
interested to find that almost $11 million of the $37 million awarded in the
first round went to Shorebank and three affiliated entities. No one disputed
that Shorebank was a worthy recipient, but $11 million was too much: The
CDFI Fund statute limited any one institution and its affiliates to $5 million
over three years. And it did seem questionable that such a high percentage
of the grants should go to a company with such strong ties to the Clintons.
Still, it is probable that Moy and Rohde could have survived Congress's
attention. A little appearance of impropriety is not necessarily a hanging
offense in Washington these days. And they could have made a strong
case that they had been motivated by a sincere belief that Shorebank, the
model for all community investment banks, deserved the larger grants.
But when the director heard that the investigators were coming, she
became concerned over an awkward fact. The CDFI Fund's selection
process called for an "evaluation memo" to be written prior to the awarding
of any grant. And such memos had been written for all the entities awarded
funding in 1996 -- except, curiously enough, in the case of the Shorebank
four.
So on April 17, 1997, the day before the investigators were to arrive, Moy
told Rohde to write evaluation memos for the Shorebank grants in time to
have them inserted into the files. But salting files with ex post facto
documents is not a very original idea, and the snoopers spotted Rohde's
handiwork right away. On Aug. 6, Treasury Secretary Robert Rubin
reported to Congress that he had accepted the resignations of Director
Moy and Deputy Director Rohde.
The Community Development Financial Institutions Fund is still in business,
but it is now a deeply suspect agency. And what was once a fine example
of the promise that government still can do things that are big and bold and
good is now a fine example of the way corruption does its corroding work,
bit by bit, until all that is left of what was something shining is a tarnished
little thing, not much good to anyone at all.
Michael Kelly is a senior writer for National Journal.
washingtonpost.com
No doubt all done "for the children". |
