With Crucial Loan, McCain Put His Bid Back in the Black

In addition to closing offices, the campaign cut loose political advisers and consultants, including four top strategists who had been paid a combined $400,000 during the first six months of the year, records show.

"We cut a lot of staff. We cut consultants. We cut it down to a bare-bones operation," said Carla Eudy, a senior adviser to McCain. "We lowered our overhead drastically."

She said her top priority was to keep the structure of volunteer fundraisers in place despite news reports suggesting that the campaign was in deep financial trouble.

"No one left us," Eudy said. "That was a key to our later success. It would have looked like we were having a mass exodus -- it would have been harder for us to stay in the game."

According to a week-by-week analysis of contributions and spending, the campaign was $300,000 in debt by early June. Then it slowed its spending and nearly broke even over the summer. By November, the campaign was again in debt, and it continued to lose money until McCain began drawing on the loan that month. That left him with an estimated $872,000 going into the New Hampshire primary.

"I've got to tell you, I cannot come up with another example of a candidate who went so far into the hole without any assurance of being able to dig out of it," said Bruce Buchanan, a University of Texas government professor.

McCain's aides were worried enough to flirt with the idea of accepting federal funds, and they reorganized their financial accounting to prepare for it. But the aides say the campaign is now unlikely to do that, because it would be forced to respect the spending caps that accompany such funds. "It would have been almost irresponsible," Black said. "We knew that this time we would have to persevere without taking the match."

After obtaining the $3 million line of credit from Fidelity & Trust Bank in Bethesda in November, McCain drew $2.97 million between Nov. 18 and Dec. 16, according to campaign records. The chief asset among $5 million pledged as collateral was McCain's huge fundraising lists.

Cleta Mitchell, a Republican campaign finance lawyer who has been a critic of McCain's, said she believes the arrangement raises serious questions. "Did they base this loan on the fact that, even if he lost, he would still be a sitting senator and able to raise money?" she asked. "In my mind, that raises questions about whether he complied with Senate ethics rules," which bar members from using their position to negotiate financial terms that an average citizen could not.

Trevor Potter, the campaign's lawyer, said the lending arrangement was vetted for the campaign and the bank. In addition to producing the fundraising lists as collateral, Potter said, the campaign promised that McCain would continue to make appeals to donors on the lists "as needed to pay off the loan."

Because McCain would have to be alive to give the fundraising lists their value, Potter said, the campaign took out the insurance policy on him.

Potter said that there is "no personal relationship between the senator and the officers at the bank," and added: "A number of the officers at the bank have made loans to presidential campaigns going back 25 years. They knew exactly how these loans were done."

The gamble started to pay off, campaign aides said, when McCain began his "No Surrender Tour." The name reflected the tour's focus on promoting the troop buildup strategy in Iraq, but within the McCain camp it had a second meaning.

"He started getting people to say, 'Well, let's not write this guy off yet,' " Black said. "Most people I've ever known would have thrown in the towel. . . . He saw a path to get out, and he took it."

Staff writer Juliet Eilperin contributed to this report.