-Caveat Lector-
August 17, 1999
Crunching a Few Numbers for
Clintons' Dream House
By DON VAN NATTA JR.
WASHINGTON -- Since the first days of her
house-hunting tour through the hamlets of
Westchester County, N.Y., Hillary Rodham Clinton has
worried that she and her husband may not be able to
afford the seven-figure showplace homes they have
inspected.
The Clintons are the least affluent couple to occupy the
White House since Jimmy and Rosalynn Carter lived
there 20 years ago. They have not owned their own
home since 1983.
At the same time they are viewing million-dollar-plus
houses, President and Mrs. Clinton are also deep in
debt. They owe a battery of lawyers $5.5 million, a
sum that far exceeds their net worth of approximately
$1.5 million.
While the Clintons are weighing whether to place bids
on Westchester properties, the administrators of the
Clinton Legal Expense Trust are mailing out new
appeals for donations and are expressing concern that
they will not be able to erase the Clintons' debt before
the president leaves office.
Yet an analysis of the Clintons' finances shows that the
first family can still afford to purchase a property in the
price range of the ones they toured on Sunday, from a
seven-bedroom, $1.7 million house in Edgemont, N.Y.,
to a 4.14-acre property in Rye Brook, N.Y., that is
listed at $2.3 million.
If the Clintons make a 20 percent down payment of
$440,000 on a $2.2 million house, a 30-year mortgage,
at a fixed rate of 8.75 percent, would mean their
monthly payment would be $13,845, said Seth Cohen,
the managing director of Home Mortgage Acceptance
Corp. in Manhattan. Cohen estimated that the Clintons
would also owe about $25,000 a year in property taxes
and about $500 a month on insurance. "That comes to a
monthly nut of about $16,645," Cohen said. He said that
the Clintons would need to earn about $525,000 a year
to qualify for that particular mortgage. Based on the
Clintons' 1998 income, the couple would qualify now
for such a mortgage.
One possible way that the Clintons could meet a high
monthly mortgage payment, before they left the White
House, would be to sell $150,000 or $200,000 worth
of securities and keep the money in an interest-bearing
checking account, supporters said. Each month, the
couple could write a check drawn on that account to
meet the high monthly payments until the president's
term expires and he begins to earn a higher income.
Friends and supporters said Monday that the Clintons
had not decided whether to buy or rent a home, but they
seemed to be leaning toward making an offer and
applying for, as one friend described it, "a super-jumbo
mortgage." And it appears that banks and mortgage
lenders would be willing to lend them a lot of money.
If Mrs. Clinton wins election to the Senate from New
York in November 2000, her annual income will be
$129,619, or 35 percent less than the president's
current $200,000 annual salary.
When he leaves office in January 2001, Clinton could
become his family's predominant bread-winner for the
first time since the early 1980s. His friends say he has
strong potential to earn millions of dollars from book
deals, speaking engagements and, possibly, serving on
corporate boards.
"He'll do great," said James Carville, a political
strategist and a close friend of the Clintons. "His book
advance alone will be enough to pay off the balance of
a large mortgage."
Other former presidents, including Gerald Ford, have
served on corporate boards. Former President Carter
has done well as an author. Former Presidents Reagan
and Bush have earned high speaking fees abroad,
including a $2 million fee paid to Reagan by a Japanese
corporation.
If Mrs. Clinton loses or abandons her bid for the
Senate, she, too, would likely be in demand. She has
already written a best seller and several publishing
executives have said they think her memoirs could fetch
more than the president's. Corporations would likely
compete for her service on their boards.
Mortgage experts say that a couple with an annual
income of $500,000 can easily qualify for a mortgage
for a home costing $2 million. Of course, most couples
do not have the Clintons' legal debts, but then those
who have such debts do not have a legal defense fund
raising contributions to erase it. But mortgage experts
said that most lenders will not penalize the Clintons for
their enormous debts unless a civil lawsuit was filed to
recover it, a possibility that is highly unlikely.
"If they wanted to do 80 percent financing on a $2.2
million house, there will be banks lining up to offer the
Clintons a mortgage, as long as there are no judgments
or liens filed against them," said Melissa Cohn,
president of Manhattan Mortgage Co., a broker for
luxury homes.
Ms. Cohn said that banks would certainly also consider
Clinton's future earning potential after he leaves office.
"They'll be more than willing to gamble on his ability
to earn solid income because of who he is," Ms. Cohn
said. "And they won't hold it against him that he is
about to become unemployed."
The Clintons estimated their net worth to fall
somewhere between $1.2 million to $5.57 million in
their most recent annual financial disclosure form
released in May. The biggest chunk -- worth more than
$1 million but less than $5 million -- came from a blind
trust of securities held in Mrs. Clinton's name. The
forms require only a range of figures rather than precise
numbers, but White House aides said that the trust was
worth slightly more than $1 million. Thanks to the bull
market, the blind trust's value has grown substantially
in the past five years, friends say.
The Clintons' adjusted 1998 gross income of $504,109
came from the $200,000 salary Clinton receives as
president and $200,318 from securities from a blind
trust they sold shortly before they paid $850,000 to
settle the Paula Corbin Jones sexual misconduct lawsuit
against Clinton. They reported a $5,236 deduction for
self-employment, as well as $16,665 in taxable
interest, $16,736 in dividends, $1,329 in a state income
tax refund from Arkansas and $74,289 in royalties from
Mrs. Clinton's best-selling book, "It Takes A Village."
In Clinton's years in the White House, the family's
adjusted gross income on their federal income tax
forms ranged from a high of $1.065 million in 1996 to a
low of $263,900 in 1994.
Mrs. Clinton herself has worried aloud about whether a
multimillion-dollar home is within her family's reach.
She pronounced a $3.8 million house beyond her
family's price range. "If I can afford it, I'd buy," the first
lady told reporters last month, "but I probably will end
up renting."
But in recent days, friends say the Clintons have felt
more confident about making an offer on a home
because of the expectation that the president will soon
be earning a much larger income.
In the 1980s, Clinton was one of the lowest-paid
governors in the nation, earning $35,000 a year, while
Mrs. Clinton pulled down a six-figure income as a
partner at the Rose Law Firm, one of Little Rock's most
profitable.
Worry over the magnitude of their legal debt has also
receded. "It's not like a Mastercard," Carville said of
the still-unpaid legal fees. "There's no interest, and the
lawyers are not going to sue the president."
Still, the Clintons' unpaid legal fees are substantial, and
they continue to escalate, even now as Kenneth Starr
nears the conclusion of his five-year-old inquiry.
According to their 1998 disclosure report, the Clintons
reported owing $1 million each to the Washington law
firms of Williams & Connolly and Skadden, Arps,
Slater, Meagher & Flom. The Clintons also reported
owing $100,000 to $250,000 to the Little Rock, Ark.,
firm of Wright, Lindsey & Jennings and $250,000 to
$500,000 to Mayer, Brown & Platt. The Clintons' legal
defense fund, which can go only to pay certified legal
bills, has already paid $5 million to their lawyers.
Earlier this year, friends say, the Clintons had to sell
more of their securities to help pay the $850,000
settlement to Paula Jones.
A little more than half of the settlement, $475,000,
came from an insurance policy against civil liability
that the president held with Chubb Group Insurance.
Most, if not all, of the remainder was withdrawn from
the blind trust held in Mrs. Clinton's name. A White
House official said that although both Mr. and Mrs.
Clinton held blind trusts in separate names, they were,
in effect, joint accounts.
Aides and friends said they did not know how much
those costs reduced the first family's net worth. More
recently, a federal judge in Little Rock ordered the
president to pay $90,000 for a contempt of court fine
for Clinton's misleading answers in a deposition in the
Jones lawsuit. Friends said they did not know how the
Clintons' have paid that fine.
To come up with the cash for a down payment, the
Clintons could sell a portion of their blind trusts. In
addition to Mrs. Clinton's blind trust, the president has
a blind trust estimated to be worth $100,000 to
$250,000, his disclosure report says. But most
mortgage brokers said that the Clintons would not be
required to put down a large down payment.
Last year, several close friends of the Clintons'
discussed the possibility of buying a home for the first
family, and leasing it to them, an arrangement similar to
one made by friends of the Reagans when they retired
to a $2.5 million ranch-style house in Bel Air, Calif.
"We talked about it pretty seriously," said one friend,
who insisted on anonymity. "But with Hillary's run for
the Senate, it's impossible."
Strict Senate gift rules would make it impossible for
Mrs. Clinton, if she wins the New York Senate seat in
November 2000, to accept gifts of more than $50.
Federal ethics rules would also prevent lawyers from
forgiving the debt owed by the Clintons, because such a
move would constitute an impermissible gift to a
federal officeholder.
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