NEWS ANALYSIS : Hearings Expose White House Foibles, Failures : Probe: No interference is found in discussions on RTC investigation of Madison Guaranty. But possible Administration offenses are uncovered.

WASHINGTON —  When Republicans first learned that President Clinton’s aides had been tipped off about the government investigation of his old friend and investment partner, James B. McDougal, they began using words not often heard here since the days of Watergate--words like cover-up and obstruction of justice.

But nearly two weeks of intense congressional hearings have failed to produce any substantial evidence that the Clinton Administration actually interfered with the Resolution Trust Corp.’s investigation of McDougal’s now-defunct Arkansas thrift, Madison Guaranty Savings & Loan.

Instead, the congressional questioning of top Administration officials has exposed other possible offenses. Among them are that Administration officials gave false testimony to Congress. Not only is it clear that Deputy Treasury Secretary Roger Altman gave incomplete information to the Senate Banking, Housing and Urban Affairs Committee on Feb. 24, it is now apparent that Administration officials saw nothing wrong with occasionally misleading Congress.

Furthermore, the hearings have exposed foibles and failures of top appointees and tensions within the Administration that are certain to prove embarrassing to the President. The Clinton White House was shown, among other things, to be obsessed by press inquiries, slow to fill key government jobs, often insensitive to the appearance of impropriety and sometimes plainly naive.

Even the Administration’s strongest Democratic defenders in Congress were horrified by some of the White House machinations. Sen. Christopher J. Dodd (D-Conn.), for example, observed that the President’s appointees were guilty of running “sort of a sloppy operation.”

“You get the impression that the kids were in charge of the schoolyard here,” said Rep. Marge Roukema (R-N.J.), referring to the young men and women on the President’s staff who played a key role in these activities.

Until the controversial contacts between the White House and the Treasury Department, which oversees the RTC, became public knowledge last February, the President had been able to argue that the Whitewater controversy had nothing to do with his actions as President. In truth, his partnership with McDougal in the Whitewater real estate project occurred while he was governor of Arkansas.

But Republicans saw the White House-Treasury contacts as an indication that as President, Clinton was given an opportunity to meddle in the government’s probe of charges that money from McDougal’s savings and loan had been diverted into Clinton’s gubernatorial campaign and to the Whitewater project.

On March 2, Rep. Jim Leach (R-Iowa) set the stage for the Whitewater hearings when he charged that a pattern of contacts between the White House and the Treasury Department had raised the specter of “obstruction of justice.” Not since President Richard Nixon was accused of covering up Watergate had that charge been leveled at a President with such seriousness.

Thus it is not surprising that White House officials were quick to point out that Leach’s charge remains unproven following the hearings. As White House Counsel Lloyd N. Cutler said: “No White House staff member made any effort to change any decision by the RTC and no decision by the RTC was changed.”

Even Leach now grudgingly admits that the criminal probe has not been stymied by the actions of the White House, even though he is still not willing to concede that no efforts were made to do so.

Yet while White House officials succeeded in persuading most members of Congress that there was no attempt to obstruct justice, Altman failed to sell his argument that he did not intentionally mislead Congress on Feb. 24, when he admitted to only one of what has turned out to be nearly 40 contacts between the Treasury Department and the White House on the subject of the Madison Guaranty probe.

There is plenty of evidence to contradict Altman.

Treasury Chief of Staff Joshua L. Steiner wrote in his diary that Altman had “gracefully ducked” questions about the contacts. Associate White House Counsel W. Neil Eggleston recalled leaving the Senate Banking Committee room on Feb. 24 and immediately calling to alert the White House that Altman had given an incomplete answer when asked about contacts with the White House.

Yet remarkably, even though two Ronald Reagan Administration aides were prosecuted for lying to Congress, some Clinton Administration officials were unconcerned by Altman’s misleading testimony. Treasury Counsel Jean Hanson, who sat directly behind Altman as he testified Feb. 24, knew that he was misrepresenting the truth, but failed to get the record corrected.

Democrats and Republicans may be at odds over the highly partisan Whitewater issue, but there is no disagreement among them that the Administration’s failure to correct the record was wrong.

“If you sit there and you have the information and it is withheld, that is improper,” said Sen. Donald W. Riegle Jr. (D-Mich.), chairman of the Senate banking panel.

Some Democrats acknowledged that the hearings had undermined the credibility of the Administration, especially when it was learned that Hanson helped prepare two differing answers to one question for her boss, Treasury Secretary Lloyd Bentsen.

In a revealing exchange with Sen. Paul S. Sarbanes (D-Md.), Steiner also demonstrated vividly how witnesses can trim their answers to misrepresent the truth. The exchange horrified Democrats as well as Republicans.

Sarbanes asked Steiner whether he had ever talked to either Altman or Hanson about their differing recollections of an event. Sensing that Steiner was not being forthcoming, Sarbanes persisted until he turned a negative answer into an affirmative one.

Steiner: “. . . I don’t believe I’ve had any specific conversations with either Mr. Altman or Ms. Hanson.”

Sarbanes: “Strike the word specific. Have you had any conversation?”

Steiner: “It’s conceivable; I can’t recall any conversations directly.”

Sarbanes: “Strike the word directly. “

Steiner: “. . . Senator, I have heard conversations where Mr. Altman has commented that his recollection is different from Ms. Hanson’s.”

Following that exchange, it is not surprising that most members of Congress participating in the inquiry refused to believe Steiner when he sought to disavow some embarrassing diary entries.

In the final analysis, as even Clinton’s defenders in Congress note, the whole controversy might have been avoided if top Administration officials had been just a bit more diligent about doing their jobs and a little less concerned about the news accounts of their work.

Indeed, Altman was placed in an unusual position when the President appointed him to serve both as deputy Treasury secretary and acting head of the RTC. Altman, already deeply involved in economic policy, was asked to oversee the RTC because the President’s nominee had withdrawn in the face of congressional opposition.

To this day, the job has not been permanently filled by Clinton.

Fear of the press within the Administration was clearly demonstrated by the way Altman made his decision to disqualify himself from matters dealing with Madison Guaranty. Some of Altman’s advisers felt he should disqualify himself in the case because, as a former classmate of the President, he was seen as being a close friend of Clinton.

After talking to then-White House Counsel Bernard Nussbaum, who opposed the idea, Altman decided against disqualifying himself. But when he learned on Feb. 25, that the New York Times was about to write an editorial criticizing him for not doing so, he promptly told the Times he had changed his mind.

Even Cutler was critical of the freewheeling way in which a wide range of Treasury and White House aides casually discussed sensitive issues with each other--what he termed “too many people having too many discussions about too many sensitive matters.”

Sen. Robert F. Bennett (R-Utah), a Banking panel member who once worked in the Transportation Department, remarked that in his experience, sub-Cabinet officers did not circumvent the chain of command and go to top White House officials, as is done in the Clinton Administration.

But perhaps even more embarrassing for the Administration is the seemingly naive way in which top officials claim to have approached highly sensitive issues.

Clinton aide George Stephanopoulos insisted that he was just “blowing off steam” when he complained to Altman about the selection of Republican Jay B. Stephens to lead the RTC’s investigation into Madison Guaranty. And Hanson, a lawyer, insisted that when she first notified Nussbaum about a criminal probe of Madison, she never dreamed she could be inviting charges of obstruction of justice.

As she put it, “It never occurred to me that he would use that information for anything other than the governmental purpose for which it was intended.”