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How McCain's Public Financing Two-Step Helps Obama

June 22, 2008 3:33 PM

Defending his broken promise to aggressively pursue an agreement with Sen. John McCain, R-Ariz., to enter into the public financing system, Sen. Barack Obama, D-Ill., during his Friday press conference argued that McCain "was all over the map on public financing, right? At the beginning of this process, when I think they were projecting raising enormous amounts of money, he said he’d consider opting out of the system. Later when his campaign had collapsed for awhile, he said he was definitely in the public financing system."

What's the truth of that charge?

**

Obama here is talking about McCain taking financing during the primary season.

At the beginning of 2007, McCain suggested that he would be interested in entering into the public financing system for the general election. But for the primaries, he was planning on raising $100 million of private funds and opting out.

That became a problem last summer, when his campaign all but disintegrated and had very little money.

In August 2007, McCain's campaign prepared to enter into the public financing system -- which would have capped how much he could spend in each state. On Aug. 10, McCain asked the Federal Election Commission for the authority to receive matching funds, and the FEC said he was eligible for $5.8 million.

But McCain did not collect any of the money. As McCain campaign spokeswoman Jill Hazelbaker put it at the time: "We have not made a final decision, but we are doing what’s necessary should we decide to opt into the matching fund system."

Towards the end of 2007, McCain took out a $4 million line of credit with Fidelity & Trust Bank. The contingencies of loan, which carried an 8.5 percent interest rate, required McCain to take out a $4 million life insurance policy.

At the end of January 2008, as McCain's prospects grew brighter in the wake of victories in New Hampshire and South Carolina, his campaign began to reconsider taking the matching funds, along with the accompanying spending caps. As Politico reported at the time, "John McCain is considering backing out of public financing now that his presidential campaign is raking in the cash."

And he ultimately did so. Meanwhile he used $2,971,697 from his $4 million line of credit with Fidelity & Trust as his campaign struggled to regain its footing.

Democrats charged that McCain had used his ability to qualify for federal matching funds as collateral, but the bank and McCain's lawyers said that was not true. What was true was that the agreement did require McCain to reapply for federal matching funds if he withdrew from public financing and lost early primary contests. The agreement also held as collateral his list of contributors and a pledge by McCain to seek further cash from those donors to pay of the loan.

McCain's maneuvering seemed to irritate FEC Chairman David Mason, a Republican, who wrote a letter to McCain in February saying McCain could only withdraw from public financing if he received the permission of the FEC and answered questions about the loan.

"The Commission made clear that a candidate enters into a binding contract with the Commission when he executes the Candidate Agreements and Certification," Mason wrote. "The Commission stated that it would withdraw a candidate's certifications upon written request, thus agreeing to rescind the contract, so long as the candidate: 1) had not received Matching Payment Program funds, and 2) had not pledged the certification of Matching Payment Program funds as 'security for private financing.'"

The McCain campaign at the end of February told the FEC it did not need the commission's approval to withdraw from the public financing system.

McCain lawyer Trevor Potter, a former FEC Chairman himself, told Mason that since the Supreme Court had ruled that public financing for campaigns is constitutional precisely because it is voluntary, "(a)s a result, candidates have a constitutional right to withdraw from the program." Potter clarified that "the campaign did not use its federal matching fund certifications as security for the campaign's bank loan."

The six-member FEC only has two members; four nominees are awaiting Senate confirmation. Without a quorum, it cannot act.

So in addition to filing a complaint against McCain with the FEC, the Democratic National Committee filed a lawsuit against the FEC to force the commission to investigate whether McCain's withdrawal from public financing was kosher.

"He used the matching funds to get the money when he needed it," said DNC counsel Joe Sandler. "That's the reality of what happened here."

Republican National Committee chief counsel Sean Cairncross called the suit "meritless….Once again, the DNC has neither the law nor the facts on their side. It is a matter of public record that the U.S. Treasury never made any payments to the McCain campaign at any time during the primary.''

Incidentally, the Fidelity & Trust Bank loan has since been re-paid.

In April, a judge ruled against the DNC suit, calling it premature since the FEC has 120 days to act on a complaint. Those 120 days expire Tuesday.

The DNC and Sandler will file the suit again on Tuesday asking a U.S. District Court to compel the FEC to act on its original complaint.

**

I cannot find any record of McCain saying "he was definitely in the public financing system," as Obama charged.

But while the loan appears to have been drafted to exclude as collateral the public matching funds, the fact that the bank would have required McCain to have reapplied for them if certain conditions had been met looks at the very least like a way to have those funds be a sort of theoretical, possible collateral while not fitting the legal definition of collateral.

Which is to say this messiness may be a big help for Obama in his attempt to make it look like neither he nor McCain were married purely to the public financing system.

- jpt

June 22, 2008 | Permalink | Share | User Comments (151)

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The media's memory is short indeed if McCain's lack of censure has been cut away from its collective memory.

Obama is not continuing to abide by the campaign finance pledge. It is true now as it was in the primary. It is not a new story either.

It has to be said McCain's lack of ability to raise money has as much to do with his campaign finance reform past as it does with this current election. It is not accurate to suggest he is in worst stead than Obama because he has a record on this issue. Feingold stayed within the boundaries of this reform and had just as bad time on raising money as McCain is having now.


Stating that both politicians are having a difficult time complying with the principle of reform is not the same as reporting what the context of raising money means to a new or an incumbent politician. It is not good with McCain "the agreement did require McCain to reapply for federal matching funds if he withdrew from public financing and lost early primary contests" or Obama is choosing to adapt some elements of reform but still ignoring spending limits. Life is too complex to have part of the story.

Posted by: Genna | Jun 23, 2008 5:00:56 PM

Republicans = Me Me Me
Democrats = We We We

I am so glad Obama opted out of public financing. This is the most important election of my lifetime. War vs. Peace. Fearmongering vs. Open Discussion. Exclusivity vs. Inclusivity. Saber Rattling vs. Diplomacy.

If he had been dumb enough to stay with public financing because of anything John McCain had to say about it, I would worry he wasn't bright enough to be President. He has done the right thing. He has to win this one or we might as well finish the shredding job Bushco has done to the Constitution. Now if only he will filibuster the FISA bill this week! (If you don't know about this, you might want to look it up. It allows retroactive immunity to the telecoms who can spy on YOU any time, as well as expands Bush's wiretapping and surveillance powers. Goodbye 4th amendment.)

Obama '08

Posted by: Dizzy Izzy | Jun 23, 2008 4:07:13 PM

That all had nothing to do with the general Election, Obama PROMISED to go the Public financing route for the General Election if the republican candidate did, and McCain decided to take Obama up on his pledge and Obama as usual double stepped, because he will be financed by the like of Soros and the Terrorists!! (the same way all those Chinese immigrants donated to Hilary) Obama is getting it the same way from the Muslims!!

FEC should look into that!!!!

Obama is a liar there is no doubt about that, he was a state leg and now running for President. No Experience, He goes to a racist church and then claims if people bring it up they are racist.

We are in a world of trouble if Obama wins in November!!

Posted by: spock | Jun 23, 2008 1:07:19 PM

It took a remarkable amount of hypocrisy from McCain and his minions to attack Obama's retractions. At least Obama's flip flopping stayed within unquestioned legal parameters, unlike McCain's.

He opted in to public financing by securing a the 5M first, which he then used as collateral for the Fidelity Loan along with the donors' list. Using a donors' list for a loan raises privacy issues, perhaps legalities.

As long as McCain didn't use the 5 million from public financing, he didn't have to commit to public financing for his nomination. So in effect, it was used as insurance. After his campaign and donations improved dramatically, it wouldn't been to his advantage to use the system with its restrictions on donations, so he opted out. But for the presidential election, given how flushed the RNC is, it's to his apparent advantage to get back in to public financing.

So now McCain has earned some well deserved bipartisan scrutiny over his opting in with the contingency to opt out, which he chose because things improved. When he opts back in, Obama gets attacked for opting out to his advantage, which is precisely what McCain did earlier.

All this opting in and opting out is a tiresome thing to contemplate for very long. But flap about flip flopping is becoming an enduring trait of this presidential election. Finally, my previous assertion about Cindy McCain paying off his loan was incredibly stupid. Thanks for deleting it.


Posted by: kat | Jun 23, 2008 12:12:10 PM

Obama breaks his promise and McCain gets attacked by the media. Too bad SNL is on haitus. All these "small" donors don't need the money I suppose. You all can easily afford $4 gas. Obama's lie means you won't get your money refunded. i wish someone would ask Obama a question as to why he feels these people do not need the money?

Posted by: geevill | Jun 23, 2008 9:35:53 AM

It does not matter how McCain wins as long as he wins!
He can get his money from anywhere he chooses he is a politician just as BO is a mere politician.
We do not want change just the same old same old politics as usual, how would we know any thing different?
Lie, flip flop, bundle donations, our crappy candidates are the SAME!
The one with the best money machine, lies and the biggest flock of sheep WINS!

Posted by: HP Boston | Jun 23, 2008 8:34:12 AM

You expect it from the
Republicans.

But some Clinton supporters
who have not been able to
reconcile themselves with the
results of the Democratic
primaries are talking up
McCain - his virtues and
abilities that are non-existent.


Posted by: anon | Jun 22, 2008 6:54:23 PM

-------------------------------------
We think we should be JUST like the BOTS!
Vote for McCain the same is better than the SAME!
No change is coming from BO, propaganda, BS, and lies from the king of flip flopper's!

Posted by: HP Boston | Jun 23, 2008 8:26:29 AM

I find this at the very least . . . . . .disturbing.

Posted by: DAVID NH | Jun 23, 2008 7:48:07 AM

Posted by: tr | Jun 23, 2008 6:20:23 AM

You are so right

Posted by: J | Jun 23, 2008 6:24:31 AM

Posted by: J | Jun 23, 2008 6:07:33 AM

i liken him to the wizard in the wizard of oz...sounds like an authority with grand powers, lots of smoke and mirrors, but when you pull back the curtain you find a little man with no ideas or clue what to do.

Posted by: tr | Jun 23, 2008 6:20:23 AM

Of course McCain is going to misstep on finance. He has Phil Gramm as his financial manager.

Posted by: Scott | Jun 23, 2008 4:14:50 AM

to Jackie,
No the point is that if you live in a glass house don't throw stone.

Posted by: Justwords | Jun 23, 2008 3:31:04 AM

The Dems are fine with this as long as it's the Dems sitting with most of the money. This election the Dems are the Wall Street darlings for a change and the one's sitting with the money so I guess what's important is not campaign reform but rather winning. It's comforting to know the Dems are no different then the Repubs and that it's old politics as usual. And those of you who think Obama's campaign is made up 100% of donations under $200 from regular people, do your homework. Who kept his campaign afloat before all those small donors came on board? Citigroup, JP Morgan Chase, UBS, Exelon,
British Petroleum, Exxon Mobil, "advisors" and "consultants" to lobbyists and "bundled" money from friends and family of lobbyists and so on. Wasn't one of the points of public financing to limit the influence of special interests? The Dems certainly don't have high expectations for their Repub opponent but I would think they would for their own candidate in particular when he claims to be about "change" and "new politics" and promises to always be upfront with the American public. It turns out he's no different then a Clinton or McCain, just the same old politics we've seen over and over again. The Obama camp has done an impressive job in attracting small donors and breaking records (Clinton also broke some records) and no one should take that away from them but the reality is that had Clinton pulled in as much money as the far more organized and up to date Obama camp did there is no doubt we wouldv'e seen the powers that be within the Dem party rally behind Clinton. That type of fundraising capacity trickles down to all levels of the Dem party and that can't be ignored in regards to it's importance. Obama contributed more money to the campaigns of superdelegates then Clinton did and Obama will have the capacity to outspend McCain in this election and as Dems we should be so proud that it all comes down to money and not principle and that those who voted in the Democratic primaries bought into false hope. Whether McCain flip flops or not is not as big of a deal when we jump on board a candidate who promised and promises so much and yet turns out to be nothing more than an "old politics"
politician. There is no hope for change with Obama.

Posted by: alpaig | Jun 23, 2008 1:27:42 AM

Questioner,
According to a commentator on ABC This Week today the $$ from "small donors" is only 45% of his total donor volume. You can believe whatever numbers you like, though, because Obama is immune to vetting.
========================================
Obama, no vetting please!!!
We are all Weary Possums!!!
========================================

Posted by: WestCoastMessenger | Jun 23, 2008 12:55:16 AM

The point is that McCain considered taking public financing or not.Obama insisted he would take it and demanded McCain and all the other potential nominees go with public financing...to "level the playing field"...and he also put it in writing and when it looked like the playing field and the money situation would be favorable to him

HE BROKE HIS WORD...Simple as that

Posted by: Jackie | Jun 23, 2008 12:50:10 AM

>>>cincyr | Jun 22, 2008 11:07:03 PM;

You DO realize that only 85-90% of Obama's windfall income for his campaign comes from you wee little donators, right?

Well..... where do you think the other 10 to 15% of the money is coming from?

Outer space?

Naah.

What do you think the B I G donees will want in return?


Guess again!

Posted by: QUESTIONER | Jun 23, 2008 12:25:55 AM

Naturally, McCain does not see
himself as a quibbler or an
equivocator but a man of
principle you can depend on.

In Des Moines, Iowa, in March
2007, here's McCain to reporters
aboard his campaign bus:

"My positions haven't changed,"
McCain said. "I'm too old to
change. I'm the same. People
will understand that as the
campaign goes on."


Posted by: anon | Jun 23, 2008 12:21:28 AM

The current voting age is fine with me. I applaud all the young people(college age) who are working the campaigns and are interested in moving our country forward by refusing to vote for a socialist, Senator Obama.
GOODNIGHT AND HAVE A GOOD WEEK.
LOL

Posted by: Mary | Jun 23, 2008 12:14:51 AM

WCM: We are being distracted by the Presidential election from the real game.

Posted by: 1percenter | Jun 23, 2008 12:06:46 AM

I just watched Recount (but it was no different than what I recall, exactly) and it is once again clear that the only way that the Democrats can ensure a win in the White House in the fall is to engage in a bare knuckled street fight with McCain and the Republicans. Obama can easily rationalize telling a big lie about public funding to prevail in this street fight. May God help us all.
=======================================
Obama, please, no vetting allowed!!
=======================================

Posted by: WestCoastMessenger | Jun 22, 2008 11:57:48 PM

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