First In His Class (71 page)

Rodham's
father taught her how
to read the stock tables. The family lived in a suburb populated by the upwardly mobile middle class, where money was considered a measure of virtue, gained through hard work and ingenuity. Then, in college, she came to reject what she described in her Wellesley commencement address as “
our prevailing,
acquisitive and competitive corporate life.” At Yale Law School, she turned down opportunities to clerk at high-salaried East Coast firms and again avoided that career path after receiving her law degree, choosing instead the nonprofit Children's Defense Fund, the Watergate impeachment inquiry staff, and a faculty position at the University of Arkansas Law School. As her boyfriend's and then husband's political adviser, she often warned him away from taking what she considered tainted money from lobbyists and discouraged him from incurring heavy debts. To some of Clinton's Arkansas friends, she seemed prudent if not parsimonious.

Then, when Rodham and Clinton reached Little Rock for the start of Clinton's career in government, Rodham seemed to have little difficulty embracing the acquisitive and competitive corporate life that she had once repudiated. Nothing could have taken her further into the blueblood establishment of Arkansas's capital city than her decision to join the Rose Law Firm, which traced its roots back to 1820 and claimed to be the oldest legal firm west of the Mississippi. The Rose Law Firm was the legal arm of the powerful, representing, among others, the holy trinity of Arkansas business and industry: Stephens Inc., Tyson Foods, and Wal-Mart. Her position at Rose Law provided Rodham with status and security, but she turned to other ventures in search of fast money. She became, at once, her father's daughter, a market-watching practitioner of unfettered capitalism, and her family's provider, trying to look after the financial side of life in a way that her husband would never do. In keeping with the interdependent nature of the Rodham and Clinton partnership, Rodham's early moneymaking ventures were undertaken in concert with Clinton's friends.

One of the iconic scenes from the sixties decade came in the 1967 Mike Nichols film
The Graduate
when Benjamin, the young graduate played by Dustin Hoffman, was approached by a businessman who had a word of advice for him: “Plastics.” That one word in that one scene captured a generation's struggle between innocent idealism and capitalist realism. In the life of Hillary Rodham, the sequel came eleven years later, in October 1978, when Jim Blair uttered two words to her: “Cattle futures.” Blair,
a Springdale
lawyer who served as outside counsel to Tyson Foods, was among the most trusted friends of Clinton and Rodham from their Fayetteville days. He was a longtime Democratic party insider who had served as a behind-the-scenes adviser in Clinton's campaigns. He was romantically involved with, and soon to marry, Diane Kincaid, the political science professor at the University of Arkansas who was in Rodham's circle
of professional women friends and who had known Clinton since the McGovern campaign. Governor Clinton would perform the marriage ceremony for the Blairs in September 1979 and Rodham would attend as their “best person.” The foursome would vacation together for years thereafter, often at the Blairs' summer cottage on Beaver Lake. They read books together and held rambling discussions on literature, politics, and the fate of the world. As happens with many pairs of couples, Jim often sided with Hillary, practical and lawyerly, and Bill with Diane, more empathetic and political. There was, however, at least one notable occasion when the split followed gender lines.
They had
all read Joan Didion's
Play It As It Lays
, a novel describing the disillusionment of a woman in her thirties who has divorced her husband, turned away from her friends, and is emotionally adrift in the emptiness of the California desert. Diane and Hillary identified with the character, while Jim and Bill said they could not understand the book. “How,” Clinton asked, “could a woman walk off and do that?”

Clinton and Jim Blair bonded in other ways. They had both grown up in troubled homes.
Blair was
abandoned by his mother and reared by his paternal grandparents in a modest apartment above an old grocery store in Fayetteville. He and Clinton both had quick and lively minds—Blair graduated from college in two years and had his law degree by age twenty-one. And both loved the art of Arkansas storytelling. They were Southern Baptists who could drop a line of scripture into any conversation or argument. A decade older and more sure of himself, Blair functioned as Clinton's smooth and confident big brother, introducing him to business figures, offering him confidential advice, helping him out of tight spots. They were both ambitious men who could become obsessed by games. Clinton was obsessed
by the
politics game. Blair, occasionally, by the money game.

When Blair found a way to win big at the money game by trading on the commodities market, he encouraged several friends and associates to get in on the action, including Rodham, knowing that she understood that world while Clinton did not. By the time he recruited Rodham, Blair had already been playing the cattle market for several months, using the Springdale branch of Ray E. Friedman & Company (Refco) brokerage house to buy and sell on the Chicago Mercantile Exchange. His broker there was another member of the extended Tyson network, Robert L. (Red) Bone, a beefy, red-faced good old boy, once described admiringly as “a real razorback,” who had worked his way up from driving a chicken truck to being a Tyson vice president before leaving the poultry industry for the brokerage profession.
Clients were
plentiful in northwest Arkansas: the Tyson company alone had three corporate investment accounts going through Refco. Brokers were making between $10,000 and $100,000 a
month. One young broker boasted that within a two-year period he had accumulated four Corvettes, a Ferrari, a Mercedes, and a boat.

Blair could
have kept the branch office in business almost by himself. From the time he started buying and selling cattle futures in March 1978, after determining that Refco had an inside track on where the cattle market was going, he was trading enough to pay Refco an average of $50,000 a month in commissions. There is an old Arkansas saying that even a blind hog finds an acorn once in a while, but Blair was counting on anything but blind luck. He maintained a special computer program at his office that analyzed the market averages over four-day, nine-day, and eighteen-day periods. Within easy sight on his desk stood a quote machine, a stock ticker, that allowed him to watch the market all day, “tick by tick,” as he once put it. He had a telephone at his side at all times, in his car, in his airplane, to ensure that he would never be out of position to make a necessary trade. At two-thirty every afternoon, he was allowed to listen in on a conference call coordinated by Refco that included cattle buyers, feedlot operators, Chicago pit traders, and Refco's Las Vegas—based president, Thomas Dittmer. At its best, his formula of information and intuition brought in more than a half-million dollars in less than a two-week span.

Rodham followed the high-rolling Blair into the market with a thousand-dollar investment on October 11, 1978, less than a month before her husband was elected governor. She kept
playing the
cattle futures game for nine months, through the middle of July 1979, by which time she had parlayed that first $1,000 into an extraordinary profit of $99,537—more than the combined salaries of herself and her husband that year. It was a wild ride, one in which Rodham, from her long-distance post in Little Rock, benefited from Blair's advice, his major trading status, and his relationship with Bone and Refco in Springdale.

Playing the commodities market is not like playing the stock market. In the stock market, the most investors can lose is the amount they invest. In the cattle futures market, investors can buy and sell cattle in separate transactions and have to guess correctly whether the prices will rise or fall. If they are locked into contracts to sell at one price at a future date, they hope prices will fall so that they can then buy contracts for that number of cattle at a lower price before the sell date: selling high and buying low. If they buy cattle first, they want the market to rise so that they can sell at a higher price: buying low and selling high. Either way, if they guess right, they can make huge profits; but if they guess wrong, they can lose more than their investment, they can lose the margin between the two prices. If the market moves in the wrong direction and there is a significant potential loss in a client's position, the broker will ask the inves tor to cover the loss.

It is a nerve-wracking game, and one that not all of Jim Blair's close friends wanted to play or understand. Diane Kincaid, who was not yet married to Blair when the investments began, said he invested money for her and her children even though she wanted “nothing to do with” the trades. “
I thought
it was terrible. I hated it. I was very concerned about the stress it put on him and I thought it was an excessive preoccupation,” she said later. “The things that I enjoyed about him were the conversations and the books we'd read together, and this was taking away from all that. I thought whatever the financial reward, there was a negative impact on the quality of our relationship. I was on a rollercoaster unwillingly. He would say, ‘This is a brief wave and I'm going to ride it and then get out.'”

Rodham was more interested than Kincaid. She wanted to learn the game. Following Blair's advice, she played aggressively, sometimes opening and closing trades on the same day. There were times when she guessed wrong, however, and should have faced margin calls, but she never got one.
She seemed
to get a break even on her first day in the market, when records show that she ordered ten cattle futures contracts with her $1,000 when that normally requires a 812,000 investment. At one point in July, shortly before she quit playing, she was $60,000 in the red and had only $40,000 in her account, but was not asked to pay the margin, and the market soon turned to her favor. Some other Refco clients caught in similar positions apparently were not given such leeway. A client named Stanley Greenwood later claimed in a lawsuit that during that same period of July he was directed to put in $48,000 to cover his losses. What was special about Rodham? The reason she was allowed to keep playing when she did not have enough money in her account to maintain her trading positions was Jim Blair. He was such a good Refco customer that he protected not only himself but his friends. “
They weren't
going to hassle me,” Blair later acknowledged. “And if I brought someone in, they weren't going to hassle them.”

Rodham closed her Refco account, she would later explain, because the game was so nerve-wracking and
she had
become pregnant that summer. S
he could
not withdraw cold turkey, however. She opened a new account closer to home, with Stephens Inc. in Little Rock, and let her broker make all the investment decisions. She closed that account in October. Not long thereafter, the cattle market collapsed, sending many investors and brokers into court, where they sued one another and filed for bankruptcy. Hugh Rodham's daughter was lucky and had the right friends, but she also exhibited a sixth sense about when to stay and when to go—a talent that she would exhibit many times in many ways over the ensuing years.

Her intellect and intuition could not always save Hillary Rodham, however, if the connection turned out to be less reliable than the one she had
with Jim Blair. She had less good fortune that year with another investment, a partnership involving the Clintons and another couple, Jim and Susan McDougal, in which they acquired 230.4 acres of undeveloped land along the White River in the Ozarks of north-central Arkansas.

For the first year of Clinton's term, Jim McDougal was a member of Clinton's staff, the governor's liaison to banking and industrial development. At thirty-nine, he was the old hand among the youthful crusaders and the one with the longest connection to Clinton, going back to the Fulbright campaign of 1968. He could often be found with his feet propped up on his desk, gesticulating with his ever present FDR-style cigarette holder, telling a colorful story about his days with Fulbright or making a classical allusion while enhancing an otherwise prosaic bureaucratic encounter. He had a rich speaking voice and what one acquaintance called “a command of the English language better than that of an Oxford don.” His young wife Susan, who had been his student when he taught political science at Ouachita Baptist University in Arkadelphia during the mid-1970s, dressed like a New York fashion model and caused quite a commotion during her frequent visits to the Capitol. “She was young and attractive and all that, but we always sort of wondered, ‘What's her deal?'” recalled Randy White. “She would float in with an air about her, kind of sweeping in. It seemed like a major production when she swept through, calling attention to herself. We kind of looked at them and went, ‘Hmmm.'”

In the summer of 1978, when Clinton was still attorney general but he and Rodham seemed sure bets to occupy the Governor's Mansion,
McDougal had
encountered them at a Little Rock restaurant and made his sales pitch on the White River land. He said later that he was in the middle of buying the property when he bumped into the Clintons, and invited them to join in the venture because he thought it would prove profitable and he always enjoyed having partners with whom he could discuss the deal's progress. Other acquaintances of McDougal said
he had
another motive as well: he thought having the next governor of Arkansas involved in the deal would make it easier for him to develop and sell the land.

McDougal had been an aggressive entrepreneur since the age of eight and had traveled around the mountain villages of the Ozarks with his greatuncle, selling feed and seed from the back of a truck. He had been making land deals since he was twenty-seven, and had pulled off several successful ones with friends and political associates, including Senator Fulbright, who went in with him on a deal in Conway where they bought the land for $100 an acre, improved and subdivided it, and sold it for $350 an acre. Clinton knew nothing about real estate and had no interest in it, according to McDougal. When he talked to the Clintons, McDougal said later, he dealt with Rodham. They formed a corporation, Whitewater Development
Company Inc., and took out a $120,000 loan from the Union National Bank of Little Rock for the down payment on the land and then a $182,000 loan from Citizens Bank and Trust of Flippin to buy the property. They secured the loans with the property itself, and expected to pay off the interest by subdividing the land into forty-two lots and selling them as vacation home sites.