Madison Guaranty facts for kids

Madison Guaranty Savings and Loan Association was a type of bank located in Little Rock, Arkansas. It was a "savings and loan" which means it helped people save money and get loans, often for homes. The company operated from 1979 until 1989.

In 1989, federal regulators had to close it down because it experienced a "bank failure." This meant the bank lost a lot of money. The government's Federal Deposit Insurance Corporation (FDIC) had to cover about $60 million in losses to protect the people who had saved their money there.

Starting in 1982, Jim McDougal owned and managed the bank. He was a friend of Bill Clinton and Hillary Clinton. Later, in 1992, during the United States presidential election, 1992, the bank was mentioned in a newspaper article. This article linked the bank to a land development company called Whitewater Development Corporation, which was owned by McDougal and the Clintons.

After Bill Clinton became president, Madison Guaranty was part of investigations by the United States Congress and a special investigator named Ken Starr. This was all part of the larger Whitewater controversy. Investigators looked into whether Jim McDougal had used money from the bank improperly.

The Bank's Early Days

In 1979, the bank started in Arkansas as Woodruff County Savings and Loan. It was given a special license to operate as a savings and loan.

From June 1979 to December 1981, the bank grew. Its total value, called "assets," increased from $2.6 million to $3.8 million.

Growth and Challenges

In April 1982, a group that checked on banks, the Federal Home Loan Bank Board, did an "audit." An audit is like a financial check-up. They found that the bank had lost a lot of money and wondered if it could stay in business.

Later in 1982, Jim McDougal and Steve Smith bought Madison. John Latham became the main leader, or chief executive officer. The bank kept growing quickly. Its assets went from $6.7 million at the end of 1982 to $48.6 million in 1986. In 1983, McDougal and his wife, Susan McDougal, took full control of the bank.

In 1984, another audit by federal regulators found that the bank was making risky loans. They warned that if these loans failed, Madison would not have enough money to pay its debts. This is called being "insolvent."

Trouble and Closure

In August 1986, the Federal Home Loan Bank Board ordered Jim McDougal to stop managing Madison. However, he still owned the bank. An appraiser, Robert W. Palmer, later admitted to making false reports about the value of properties.

In 1986, the bank's total value reached its highest point at $125.5 million.

On March 2, 1989, federal regulators took over Madison. This is called being put into "receivership." The Federal Savings and Loan Insurance Corporation (FSLIC) became responsible for handling the bank's closure.

Jim McDougal was later found responsible for issues related to bad loans made by Madison. He was ordered to pay back money to government agencies.

Madison Guaranty and McDougal hired the Rose Law Firm to help them. Hillary Clinton worked at this law firm. There was a time when her billing records for work on Madison Guaranty were missing. These records would have shown how much work she did for the bank. McDougal also held a special event at Madison Guaranty that helped pay off Bill Clinton's campaign debt. Later, in 1996, Hillary Clinton's billing records were found.