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This could be another reason that Senator McCain wants Senator Obama to only run on federal matching campaign funds. It seems as if McCain might have fucked himself a little while back in the primaries
Did McCain Inadvertently Commit Himself to Public Funding?
by DHinMI
Sat Feb 16, 2008 at 11:29:27 AM PST
The day of the Florida primary I wrote about John McCain's financial dilemma:
Some months back McCain's campaign applied for federal matching campaign funds. (The money comes from individual taxpayers who voluntarily check off a $3 contribution on their income tax return.) In December seven campaigns were officially notified that they qualified for matching funds. However, because of a funding shortfall, none of the federal matching funds have been released. Apparently the fund reserves the money needed for the general election before it starts to pay out matching funds for the primary, and until monies arrive from this year's tax returns, the fund doesn't have enough money to deliver money for the primary. John Edwards secured a bank loan against the federal funds, so he is officially locked in to abiding by the spending limits in the event he gets the nomination.
McCain qualified for $5.8 million in matching funds. He could do as Edwards has done, and get the money now by securing a bank loan against the eventual payment from the US Treasury. But McCain has been anything but "straight talking" regarding his money; until he receives the money from the Treasury or borrows against it, he's not locked in to the system. Thus, he's currently trying to evade the federal spending limits if he can raise enough money to stay viable, but holding out the option of taking the federal funds if he can't survive through tonight.
Here's McCain's problem. Accepting federal matching funds would limit him to spending no more than $53-$55 million during the primary period. (The exact figure will be adjusted based on the campaign's fundraising expenses and other expenditures.). If McCain wins the nomination and accepts the matching funds, the $53-$55 million limit would constrain his spending all the way until the beginning of September, when the Republicans nominate their candidate at their national convention in Minneapolis.
McCain never spent any money borrowed by using his certification for federal matching funds as collateral. However, he may have committed himself to the spending caps—which would be disastrous for his campaign—by promising to enter the federal matching funds program in order to secure a $1 million loan he ended up not using:
John McCain's cash-strapped campaign borrowed $1 million from a Bethesda bank two weeks before the New Hampshire primary by pledging to enter the public financing system if his bid for the presidency faltered, newly disclosed records show.
McCain had already taken a $3 million bank loan in November to keep his campaign afloat, and he sought from the same bank $1 million more shortly before this month's Super Tuesday contests, this time pledging incoming but unprocessed contributions as collateral. He never used the funds of the most recent loan, because his win in the South Carolina primary helped him raise enough money to compete in Florida, his campaign aides said last night...
McCain's campaign filed the modification to his initial $3 million loan on Dec. 17, seeking an additional $1 million. The bank asked him to produce something more than his campaign's assets as collateral.
"They said, 'You've explained how you can afford to borrow more, and how you can pay us back if things go well. What happens if things go badly?' " said Trevor Potter, a McCain attorney.
The campaign's response, Potter said, was that McCain could reapply in the future for federal matching funds, and would agree to use the FEC certifications for those funds as collateral.
Under the agreement, McCain promised that if his campaign began to falter, he would commit to keeping his campaign alive and to entering the federal financing system so the money he had raised could be used to gain an infusion of matching funds. Had that happened, he would have been forced to abide by strict federal spending caps before the Republican National Convention in September.
Under FEC rules, a candidate who uses a certification for federal funds as collateral for a loan is obligated to remain within the public financing system. "We very carefully did not do that," Potter said.
Cleta Mitchell, a veteran campaign finance lawyer and a McCain critic, said she has never encountered a similar agreement.
"They've clearly got a sweetheart deal with this bank," Mitchell said. "This bank is just a cash register for them."
Think of it like this. John McCain secured a personal loan by using his home as collateral. He requested more money be added to the loan, but the bank said it was more than he had collateral to pay back. McCain countered by telling the bank that his neighbor failed to salt his icy sidewalk, and McCain slipped on it. McCain got a doctor to say the slip-and-fall hurt McCain's back, he sued the neighbor, and he expects to win a big settlement. The bank said "sure, OK, that's what happens if you win your court case. But what if you lose?" In response McCain said "oh, I suppose I'll have to get a job," and the bank then said "OH, OK, that's good enough for us!" and authorized the loan.
If McCain used the certification for matching funds as collateral he would have definitely been locked in to the matching funds scheme, including the spending caps. What happened here is that the bank didn't require him to offer up the certificate as collateral. The bank simply accepted McCain's word that he had it and would enter the federal system if necessary, and the bank took him at his word.
The question that needs to be answered is whether this sweetheart deal with the bank, which gave him the funds based on his word that he would use the matching funds if necessary, amounts to a de facto use of the qualifying certificate to secure the loan.
I wonder if this is even legal? any bank that I've ever done business with has always wanted collateral.
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