McCain Got Loan by Pledging to Seek Federal Funds
Saturday, February 16, 2008
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.
The loans, revealed yesterday in documents a McCain attorney filed with the Federal Election Commission, offer fresh details about how the Republican senator from Arizona scrambled to secure money as his shoestring campaign navigated a rapid-fire succession of primary contests.
The unorthodox lending terms also raised fresh questions from McCain's critics about his ability to repeatedly draw money from the Maryland-based Fidelity & Trust Bank. Campaign finance lawyers speculated whether McCain may have inadvertently committed himself to entering the public financing system for the remainder of the primary season by holding out the prospect of taking public matching funds in exchange for the $1 million loan in December.
"This whole area is uncharted," said Lawrence H. Norton, a former general counsel of the FEC.
McCain's attorneys and the Fidelity & Trust president said the loan agreements were carefully scrutinized in advance to make sure they would pass muster with federal banking regulators and the FEC.
"We stayed in a safe zone, and so did he," said Barry C. Watkins, the bank's president. "We were being careful not to force either one of us into a situation we didn't intend."
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.