The Other McCain Story

by hilzoy

A few days ago I wrote about a loan John McCain had taken out, in which he tried to use his future eligibility for federal matching funds as collateral. Presumably, he did this in order to get the money he needed to keep his campaign afloat without using the matching finds themselves as collateral. And the reason it was important not to use those funds as collateral was that according to the FEC, doing so would constitute "accepting " those funds, and thus subjecting himself and his campaign to the limitations that go with it.

I am not a lawyer, and thus have no opinion about whether McCain's loan violates the, um, McCain Feingold Act, or any other provision of federal law. But I did think that this was a pretty transparent attempt to violate its spirit. Campaign finance laws ask candidates to make a choice: either you take federal money, in which case you are subject to a number of restrictions, or else you don't take it, in which case you are not. Getting a loan by using the matching funds you have not yet received as collateral is a way of trying to have it both ways: essentially, you get to spend your matching funds now, but because the money did not literally come from the government, you can delay a decision about whether or not to accept the restrictions that go with them until later. If you can leverage the money into enough wins to generate contributions, you can pay back the loan and duck the restrictions; if not, you've lost anyways, so you might as well abide by them. That's exactly what campaign finance laws do not want candidates to be able to do.

McCain tried to be tricky about this: he didn't use the matching funds he had qualified for as collateral, but he did use the fact that he could qualify for them at any time. That's why he had to give away his legal right to withdraw from the campaign if he lost: to satisfy his lenders, he had to promise to stay in long enough to actually get the matching funds he qualified for, and to give them first dibs on those funds. Whether or not this violates the law -- a law McCain authored -- I have no idea, but it is certainly an attempt to wriggle out of its requirements, and it ought to put paid, once and for all, to the idea of McCain as a straight-talking man of principle.

Apparently, the FEC has the same questions I had about McCain's loan. The AP reports (h/t TPM):

"The government's top campaign finance regulator says John McCain can't drop out of the primary election's public financing system until he answers questions about a loan he obtained to kickstart his once faltering presidential campaign.

Federal Election Commission Chairman David Mason, in a letter to McCain this week, said the all-but-certain Republican nominee needs to assure the commission that he did not use the promise of public money to help secure a $4 million line of credit he obtained in November.

McCain's lawyer, Trevor Potter, said Wednesday evening that McCain has withdrawn from the system and that the FEC can't stop him. Potter said the campaign did not encumber the public funds in any way. (...)

By accepting the public money, McCain would be limited to spending about $54 million for the primaries, a ceiling his campaign is near. That would significantly hinder his ability to finance his campaign between now and the Republican National Convention in September."

The FEC's letter to McCain is here (pdf); the amount McCain has already spent during the primaries is $49,650,185.36; the exact FEC limits on primary spending are not yet available, but if this were 2007, they would have been $40.89 million, which is considerably less than McCain has already spent. I assume that the AP got its figure of "about $54 million" from the FEC; if so, then McCain has about four and a half million dollars to spend between now and the Convention in September.

One further problem:

"Complicating the dispute is the FEC's current lack of a quorum. The six-member commission has four vacancies and Senate Democrats and Republicans are at loggerheads over how to fill them.

In his letter, Mason told McCain he would need the votes of four commissioners to accept his withdrawal from the system.

"The commission will consider your request at such a time as it has a quorum," Mason wrote.

Without action by the Senate, McCain could be waiting indefinitely. (...)

Potter [McCain's lawyer] said McCain will continue with his campaign and not adhere to the public financing system's limits on spending. Without a full commission, Mason has little enforcement power. Likewise, without an FEC, McCain has no way to appeal Mason's conclusion."

The FEC thinks it needs a quorum in order to approve McCain's withdrawal. But it also needs a quorum in order to enforce its decisions. And as Mark Schmitt said about McCain, "it's pretty clear that his attitude toward the Federal Election Commission on this question is, "Come and get me!""

Comments

[Tim]

It's a credit derivative, not an actual loan. It's part of the amazing flexibility of the American economy. It's the American way, you would-be commie.

[Davis X. Machina]

....it ought to put paid, once and for all, to the idea of McCain as a straight-talking man of principle.

That will take twenty to thirty years years to change.

The Republicans, after all, are still the party of fiscal discipline.

[trilobite]

Thanks for explaining the issue so clearly, Hilzoy. I am a lawyer...but not an election law lawyer, so I don't care to venture an opinion on whether McCain violated his own law. I will say this much:
a) campaign finance laws, like tax laws, tend to be highly technical and narrowly construed because we don't want to discourage initiative, so if he found a way around the letter of the law he should not be in legal trouble for breaking the "spirit," but
b) relying on technicalities to avoid the effect of a law you yourself drafted looks really ugly. I can't help but imagine that when McCain drafted the bill, he had this back door in mind all along, which makes his bill, and his pose as a reformer, a charade.

I am amused that the Democrats in the Senate could theoretically put McCain in jeopardy simply by not refilling the FEC, so it cannot get a quorum to accept his withdrawal. I wonder which side would look worse in the press: McCain for breaking his pledge, or the Senators for putting him in limbo? It's probably not a good idea for the Democrats, tho, because without a quorum, the FEC also can't enforce.

The really smart thing would be for the Dems to delay until Obama steps forward and magnanimously votes to break a tie and fill the FEC slots. With a speech about how it's too bad McCain didn't just ask him to help instead of breaking the law. But I cannot imagine the Senate Dems being that well organized or clever.

[Nell]

The Dems are not the ones delaying. It's the Republicans who are insisting that there can be no votes on any FEC vacancies in order to avoid a separate vote on each nominee. That's the only way they can force voter suppression specialist Hans von Spakovsky onto the commission.

[trilobite]

Thanks, Nell. Well, that's good to know. Hey, does that include McCain? What a great talking point:

John McCain swore he would accept federal funding rules. Now, he wants out of his promise. He could just ask the FEC to release him, but Senator McCain won't let the FEC act. He prefers to break the law and his own promise, and paralyze the FEC so it cannot punish him. Haven't we been down this road before? Vote to restore law to the White House.

Even if it's just his colleagues doing it, some hay could be made out of this, methinks.

[retr2327]

For a non-lawyer (or maybe because you're a non-lawyer), you do an amazing job of getting to the heart of this issue. But you really should include an excerpt from the FEC's letter, which is priceless:

"We note that in your letter, you state that neither you nor your committee has pledged the certification of Matching Payment funds as security for private financing. In preparation for Commission consideration of your request . . . we invite you to expand on the rationale for that conclusion," including explaining the language in the loan documents where McCain promised to remain in the race, and seek public funding, in return for the loan.

"we invite you to expand on the rationale for that conclusion" is the most elegant way of saying "WTF is this BS" I've ever heard. I bet McCain is praying the commission never has a quorum.

[Ugh]

This is the perfect opportunity for Obama to get out of the "pledge." He can just say, "when I made that statement, I assumed that an agreement could be reached that would be honored by both sides, especially if Sen. McCain were to win the Republican nomination, as he's one of the leading proponents of campaign finance reform. However, it now appears that Sen. McCain is willing to twist the very law he championed to the breaking point to get around the limits he says he so dearly believes in. Under these circumstances, I do not believe that any agreement we might reach would be honored by his campaign in spirit or letter, and so I will not accept public funding for my campaign."

Plus he can throw in the jabs trilobite suggests.

[KCinDC]

Ugh, maybe Obama could write a sarcastic letter to McCain. He could base it on this.

[Ugh]

Ugh, maybe Obama could write a sarcastic letter to McCain. He could base it on this.

I remember that. IIRC Josh Marshall said that it sort of came out of the blue and was probably done in case McCain and Obama faced off in the Presidential race as something McCain could use to whack Obama over the head with (I don't recall how exactly it would do that, maybe showing the Obama is just another politician?). This whole loan to get around the rules thing probably makes it less effective though.

[Incertus (Brian)]

The question would be, which one of them would the media whack over the head with it? I'm assuming Obama, because when it comes to political coverage I'm a pessimist. Or a realist--whatever. But it's clear to me that McCain would be the bigger hypocrite--he wrote the law, after all, and to refuse to abide by it would be extraordinary.

[jpe]

I am amused that the Democrats in the Senate could theoretically put McCain in jeopardy simply by not refilling the FEC, so it cannot get a quorum to accept his withdrawal.

If I were McCain, I'd just withdraw unilaterally and let the FEC sue later if it wants. Based on my reading of the laws and regulations, there's absolutely nothing prohibiting a unilateral withdrawal, and nothing in the statute granting the FEC the authority to create rules for withdrawal. (and thus there's no problem of Chevron deference, wherein an agency that has been delegated authority gets a verrrrry strong benefit of the doubt from the court)

Given that the statute is absolutely silent as to withdrawal, the argument can't be plausibly made that McCain would be violating the spirit of the law, either.

[hilzoy]

I think that in a contest between someone who is trying to get out of something that might be construed as a pledge to accept public financing, but might also be construed as a pledge to work out an agreement governing not just public financing but e.g. 527s, where the latter agreement doesn't seem to be forthcoming, and someone who is trying to get out of the law, the winner for Worst Person is pretty clear. But then, I'm probably biassed.

What I don't fully understand is why so few people seem to have picked up on the "he gave away his legal right to drop out of the race at will" aspect, which seems to me to be the most jaw-dropping part.

[Ugh]

What I don't fully understand is why so few people seem to have picked up on the "he gave away his legal right to drop out of the race at will" aspect, which seems to me to be the most jaw-dropping part.

If you can explain the whole situation in a 15 second sound-bite, then we may get somewhere. Maybe "McCain agreed to conduct a fake campaign in order to get public money to repay a loan to his campaign" or something?

[trilobite]

KCinDC, dag, what a bitchy letter by McCain. I hadn't seen that little exchange before.

I have no idea what they really said at their private meeting, but I find it hard to imagine that Obama was crazy enough to say "John, no matter what, I will work for your solution to this problem, not Harry Reid's" and McCain's letter was way over the top for anything less.

[ASeaton]

Money is the root of all evil...

Huckabee is the president for me
www.mikehuckabee.com

[McKingford]

Although I think it is important to understand the legal side of this, doing so shades the fact of just how venal this stunt was - and I think *that* is the real story.

What McCain was doing was borrowing money he knew *he'd* never have to pay back. If his campaign did well, he'd opt out and have his contributors pay the loan. But if he tanked, he was prepared to leave the American taxpayers footing his bill; *he* wouldn't pay back the loan, the American taxpayer would - through the mechanism of public financing.

Think about it: St. John of McCain, the martyr against pork, and waste, and all of that, was placing a wager that counted on taxpayer dollars to bail him out if he rolled craps.

[Gary Farber]

McCain seems to have a small contradicting himself under oath problem. That is, he said something under oath which contradicts his current story:

[...] Just hours after the Times's story was posted, the McCain campaign issued a point-by-point response that depicted the letters as routine correspondence handled by his staff—and insisted that McCain had never even spoken with anybody from Paxson or Alcalde & Fay about the matter. "No representative of Paxson or Alcalde & Fay personally asked Senator McCain to send a letter to the FCC," the campaign said in a statement e-mailed to reporters.

But that flat claim seems to be contradicted by an impeccable source: McCain himself. "I was contacted by Mr. Paxson on this issue," McCain said in the Sept. 25, 2002, deposition obtained by NEWSWEEK. "He wanted their approval very bad for purposes of his business. I believe that Mr. Paxson had a legitimate complaint."

While McCain said "I don't recall" if he ever directly spoke to the firm's lobbyist about the issue—an apparent reference to Iseman, though she is not named—"I'm sure I spoke to [Paxson]." McCain agreed that his letters on behalf of Paxson, a campaign contributor, could "possibly be an appearance of corruption"—even though McCain denied doing anything improper.

Just gossip, OCSteve, von, Sebastian?

But let's hear more from McCain about how in all his long career, he's never, ever, done an official favor for any contributor. Like Ken Keating, or a long list of subsequent people.

None of which anyone should be bothered by, because when John McCain gives favors to campaign contributors, it doesn't count, because he's John McCain.

[Gary Farber]

More about McCain and Paxson. Could we hear again about about how McCain never does favors for his contributors? After all, repetition makes it true.

[Gary Farber]

Ooh, even more crunchiness. Such gossip.