This reversal makes it all but impossible for him to bring an indictment against Hillary Clinton or senior White House staff before the election in November. An indictment at a high level was seen in the White House as one of the few rogue cards that could upset Mr Clinton's re-election strategy.

Mr Starr said that his investigations would continue and that the case against the two bankers had not been central to the rest of his inquiry. His prosecutors are still examining events in Washington, notably whether White House staff conspired to cover up embarrassing details about the removal of files from the office of the late Vincent Foster and other matters.

Whitewater, and related events, continue to take a heavy toll on the White House staff, as was apparent on Thursday when Mr Clinton snapped at two reporters during a press conference.

Mr Clinton was asked if he would sign a Bill reimbursing the legal fees of seven members of the White House travel office who were sacked in 1993 and replaced by friends of the Clintons. The head of the office, Billy Dale, was tried and acquitted on fraud charges in a prosecution Republicans say was politically motivated.

The White House spokesman had indicated the President would approve the Bill setting aside £330,000 for their legal fees, but Mr Clinton angrily denied that was the case. "I didn't say that . . . I never gave my word," he said, surprising aides by showing in public the temper they often see in private.

Mr Clinton questioned why Mr Dale's legal fees should be paid when many of his own staff "have been dragooned and pulled up and had tens of thousands of dollars of legal expenses". Mr Clinton later apologised to one of the reporters, blaming fatigue caused by the long hours he has worked since the TWA crash. Otherwise, all was looking rosy for the White House team as Congress went into the summer recess and eyes turned to the two party conventions later this month.

This article appeared in Saturday's edition of the Daily Telegraph