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Today's Must Read
It's a free country, damn it, and the FEC ought to quit hasslin' John McCain.
That, at least, is the shorter version of the letter the McCain campaign's lawyer Trevor Potter (a former FEC chairman himself) sent the FEC yesterday. In the letter, Potter argued that the campaign didn't need the FEC's say-so to opt out of the public financing system. As the AP reports:
...Potter said the Supreme Court concluded that public financing for campaigns is constitutional because it is voluntary. "As a result, candidates have a constitutional right to withdraw from the program."
To recall the stakes: the public financing system for the primaries entails a $54 million spending limit, an amount that McCain has pretty much already spent. If the FEC were to decide that he could not leave the program, it would be an incredible problem for his campaign.
Of course, the chances of the FEC of doing anything are zilch right now, because David Mason, the Republican chairman, is one of only two commissioners. Four nominees are stuck in the Senate because of the fight over Hans von Spakovsky. But Mason has written the McCain campaign to tell them that McCain cannot withdraw from the program without the FEC's say-so, since McCain effectively entered into a contract when he opted in to the program last year.
Potter, as you can see above, doesn't think much of that argument. But then there's the other problem: the McCain campaign's creative financing, the very clever $1 million bank loan last December. The burning question for Mason is whether the loan was just clever enough or too clever by half.
We outlined the deal in detail here. But the basic idea is that McCain's lawyers knew he could not use the $5.8 million in public matching funds the FEC had certified for his campaign as collateral for the loan, since that would have effectively locked him into the program. So the campaign promised the bank that if he lost the primary, he'd opt out of public financing, but stick in the race, and then opt back in, get those matching funds, and then pay off the bank. That way, voila! he wasn't using that prior certification as collateral. If you're confused, you're not the only one.
The bank's lawyers (one of them another former FEC chairman) laid it out in a letter which also made its way to the FEC:
"The bank does not now have, nor did it ever receive from (McCain's campaign) committee, a security interest in any certification of matching funds," [Scott] Thomas and lawyer Matthew S. Bergman wrote....The loan documents specifically state that the collateral did not include McCain's right to the public funds. But the agreement with Fidelity & Trust Bank of Bethesda, Md., required him to reapply for matching funds if he withdrew from public financing and lost early primary contests.
"It is our understanding that, to date, none of those events have occurred," the bank lawyers wrote.
Very clever.
So now we'll see if the FEC's current chairman buys all this. And no matter what he says, it seems likely this issue is far from resolved.





I saw an argument from Howard Dean, that McCain also used his commitment to public financing to get himself on the ballot in many states. Perhaps you could follow up on that as well?
February 26, 2008 10:22 AM | Reply | Permalink
None of this sounds like particularly straight talk to me.
February 26, 2008 10:23 AM | Reply | Permalink
This is a bit like the Enron deal structures.
February 26, 2008 10:41 AM | Reply | Permalink
Yes the program is voluntary. But he voluntarily agreed to it. By doing so, he agreed to abide by the rules, such as the one that he cannot unilaterally decide to withdraw.
February 26, 2008 10:46 AM | Reply | Permalink
Don't you all get it? Laws that restrict only apply to Democrats! That is the new Rethuglican spoils system.
Of course the actual election is optional based on the predicted outcome.
February 26, 2008 10:47 AM | Reply | Permalink
the other Steve is right
in addition to encumbering the public funds by using them as collateral, john mccain received BALLOT ACCESS thru the public financing system
if he hadn't used public financing access, mccain would have had to spend MILLIONS of dollars to qualify for the ballot in several state primaries
it's all out there in the public records
give em hell Josh
we got your back
February 26, 2008 10:50 AM | Reply | Permalink
Contracts only apply in a democracy. Now that we have decided to forego our democracy, important people no longer have to pay attention to these little problems. We common folk, however, will find ourselves in trouble if we neglect to abide by them..
February 26, 2008 11:00 AM | Reply | Permalink
McCain entered into a contract with the public financing agreement. He received benefits from the contract such as bypassing the signature requirements in many states to get on the ballot and obtaining a loan so he can't just cancel the contract without the FECs blessing.
If he can does that mean that if I sign up for the volunteer Army can I opt out at any time if I don't cash the checks they send me? Can I still do it if I finance a new car based on the fact that I am employed with the Army?
February 26, 2008 11:02 AM | Reply | Permalink
"If he can does that mean that if I sign up for the volunteer Army can I opt out at any time if I don't cash the checks they send me? Can I still do it if I finance a new car based on the fact that I am employed with the Army?"
this is gold.
February 26, 2008 11:12 AM | Reply | Permalink
Doesn't this effectively blunt McCain's recent efforts to "shame" (using the apparent word of the day) Obama into fulfilling some pledge to use public financing for the general election?
February 26, 2008 11:18 AM | Reply | Permalink
I think Steve has it dead on here, and Paul, despite your great reporting I think you are not emphasising this enough -- it's not just the loans, it's the ballot lines. Dean spent MILLIONS getting on ballots after he opted out of public financing. That is not just a promise to a bank -- there's an argument to be made that banks can take whatever they like as adequate collateral, it's a private contract between two parties, and he only said he would use the public financing IF he needed it, which is not a lie -- the free ballot lines were a concrete monetary gain premissed on his accepting public financing. That is an explicit lie McCain told for his own benefit.
February 26, 2008 11:20 AM | Reply | Permalink
Actually, contracts only stand if both parties are competent enough to understand them, entered into freely and are for lawful purposes... I wonder what the implications of compliance with these stipulations are.
February 26, 2008 11:21 AM | Reply | Permalink
geez,
The straight talk express sounds pretty crooked.
A 71 YO crook is at the helm who earned his stripes in the all male crooks club: the US Senate.
Imagine if Hillary was in such trouble. She'd be trashed and burned by the msm. Instead, McCain is going ot duke it out,through his lawyers. What a sad state of affairs this election cycle is turning out to be.
Its giving me further reason to disparage lawyers and lawmakers.
February 26, 2008 11:37 AM | Reply | Permalink
People, people.
You're forgetting the missing 10.5th Amendment to the Constitution:
The right to accept public financing for a campaign, and then back out of deals when you want to, even when it violates a contract, shall not be infringed.
February 26, 2008 11:44 AM | Reply | Permalink
Geez, McCain, y'know, ordinarily, i'd feel bad about you losing your 'constitutional rights,' however, you haven't done jack sh*% as We The People have lost ours, so I hope this hits you where it hurts--in the wallet!
February 26, 2008 12:05 PM | Reply | Permalink
If McCain's withdrawal violates a binding contract, then the other party to the contract can sue him. If the parties don't settle, a court can order "specific performance," which means it can order the violator to do what he had promised to do (in this case, remain in the public financing system), OR the court can order the violator to pay money to the complaining party (that is, to pay "damages"). Contract law generally favors the latter solution. Lawyers opposing McCain will have to show how the damage in this case cannot be compensated via a money payment. If they win the case but fail to get the court to order specific performance, then they will have to establish what damages they actually suffered and what amount of money would best compensate for the damages. McCain's opponents might also want to try for an injunction, of course, but then they would have to show, among other things, that they had standing to bring the matter before the court. The FEC would presumably have standing, but if they are unable to take any action at all because they lack a quorum then it is hard to see how they could sue. Bottom Line: McCain gets away with it, at least to the extent that he can spend money in the short run.
February 26, 2008 12:09 PM | Reply | Permalink
This initial discussion has ignored the aspect that Howard Dean mentioned, that McCain has used the public financing promise to get his name on many state ballots thereby bypassing the need to go through the process of getting signatures. This is something that usually costs millions of dollars. That alone should represent having accepted public financing. As for any claim of constitutional freedoms, it actually seems a lot like Bush, where laws are only meant for other people. McCain has a constitutional right to ignore a law he helped bring about. Others don't have that choice - others likely being non-Republicans. He's the war president candidate.
But even on a superficial level, the public financing law is more like a contract than a law that restricts one's constitutional rights. McCain agreed to the contract when it suited his needs and now that it doesn't he no longer wishes to abide by its terms. A deadbeat in other words. Certainly not any sort of freedom fighter or rights advocate.
On a fundamental level McCain's attempt at gaming the system with a promise to get public financing only if his presidential run tanked and was worthless, makes Reagan's mythical and racist "welfare queen" seem like a paragon of virtue concerned about "what you can do for your country." "Welfare John" would go to the race track and borrow money to make his bets. If he won, he'd pay off the bet loan with his winnings and go around like a sharp eyed horseman. If he lost he'd get the welfare state to cover the costs. Nice. A man of integrity. Someone quite suitable for the office of U.S. President.
"Welfare John." I wonder if he runs onto public buses after they've been in traffic accidents to claim personal injury.
February 26, 2008 12:20 PM | Reply | Permalink
Welfare John. Let's hammer it home...
February 26, 2008 12:35 PM | Reply | Permalink
We all know who is going to blink first.
Our govt. and officials have eyelid Turrettes syndrome from all the blinking they do, in favor of corps and rightwingers and against the people, the left.
We wouldn't want an uncomfortable scene, no matter how bad the people are defrauded. We wouldn't want to cause a little discomfort to a well connected or well-heeled personage, no matter how many little people's necks get stood on.
Please, Josh and David and the rest, keep pushing. Keep pushing.
February 26, 2008 12:35 PM | Reply | Permalink
I'm not an attorney, but I did stay in a Holiday Inn Express last night.
Am I reading something into the discussion re: the bank loan? As I see it, while he didn't use the public funding agreement as collateral, he did include the presence of public funding as a point of justification for the loan. If he decides to opt out of the public funding, it appears to me that he's guilty of bank fraud.
Can someone help me with this idea?
February 26, 2008 1:02 PM | Reply | Permalink
McCain stands revealed as just another Republican crook. But, the voters don't mind that at all. So, don't expect any payback from the voters. And, any action by the government has to await the FEC having a quorum, which means sometime in 2009. By then McCain may be President. End of story. But, a Democrat may instead be President. End of story.
So, the real serious issue facing us is that Obama may have roots in Africa. You coulda knocked me over with a feather when I read about that. I thought the guy was just a sun bather.
February 26, 2008 1:40 PM | Reply | Permalink
What delicious irony that McCain can't get the FEC to rule on his behalf because his new BFF, George Bush, won't give up his nomination for voter disenfranchiser extraordinaire von Spakovsky.
-AF
Andrew Sullivan Is A Fraud
February 26, 2008 2:26 PM | Reply | Permalink
Has anyone done an analysis of what happens to McCain's delegate count if you subtract the states where he got a free ballot line as a result of agreeing to public financing? Seems like the GOP race might have another presumptive front-runner. (unless of course by "runner" you mean "fugitive".)
February 26, 2008 2:28 PM | Reply | Permalink
Also, this legislation has already been to the Supreme Court once, where it was found to be largely constitutional:
http://en.wikipedia.org/wiki/McConnell_v._FEC
Maybe McCain should hire Mark Geragos to represent him--although his lawyer is doing a pretty good impersonation right now...
February 26, 2008 3:09 PM | Reply | Permalink
Another question no one in the press seems to be asking is why the hell McCain got a bank loan in the first place.
McCain's wife is worth at least $100 Million Dollars.
So why did he get the loan with the bank instead of his wife?
So his wife didn't want to lend him the money, why not use her fortune as collateral instead of going through with that public financing sham?
His wife knew he was good for it, the public financing ensured she would be repaid. So why'd he go to a bank?
It's obvious that McCain's wife didn't give him her full support, Someone needs to ask him (or her) Why?
I'm not holding my breath, most of the press doesn't have the temerity to ask tough questions like that. Perhaps they're worried that McCain's response would be to blow his top.
I'm not a newsman, but a candidate blowing his top sounds like a good news story to me.
February 26, 2008 3:34 PM | Reply | Permalink
It's not as much fun spending your own money when you can spend other people's money?
That's about the only semi-reasonable explanation I can think of.
February 26, 2008 4:09 PM | Reply | Permalink
If we were talking about her actually spending her own money or even risking a loss of funds, I could see her reticence.
But we're not talking about actually spending her own money or a risk of loss. She wouldn't have to have removed a penny from her accounts. She would only have needed to use her fortune as colleratal for the bank loan. All with the full knowledge that public financing would insure her against any losses.
Even if she had lost faith in his campaign, even if she though he had absolutely no chance of victory, because of the pending matching funds, backing his loan should have carried absolutely no financial risk for her.
I'm certainly no expert in public financing. Perhaps using her fortune as colleratal would have required an opening of her books, something she has not yet done. If there is something bad hidden in her finances, it's not likely to stay hidden long. I can't recall the last Presidential nominee that didn't open their and their spouse's financial records in a general election campaign.
Absent any reasonable financial or legal reason for her declining to financially back his campaign, one of the few remaining possibilities is that there has been substantial personal friction in the McCain household.
February 26, 2008 5:11 PM | Reply | Permalink
Ahh, good point. Using her fortune as collateral would have resulted in calls for her to release her financial statements. Interesting thought.
Well, either way, McCain's got himself in a bind now, and he's certainly lost the right to bicker with Obama about his "pledge" to use public financing.
February 26, 2008 5:20 PM | Reply | Permalink
The simple reason McCain's wife didn't loan the campaign the $millions they needed is that it would be grossly illegal for her to do so. Unless the McCains have mixed their assets so all of their combined assets are community property, 100% owned by each of them separately, his wife is limited to a $2300 loan to the campaign just as anyone else is. The campaign finance laws treat a loan exactly the same as an outright donation.
The campaign's only choice for borrowing money was a bank, and even that may well be prohibited by the finance laws. That question requires even more knowledge than the half vast knowledge I possess.
February 26, 2008 10:31 PM | Reply | Permalink
Interesting, thanks for the insight.
This really begs the question as to why they no longer have joint finances. I'm fairly certain they did at one time, as she is reported to have funded some of his earlier runs.
Couldn't they have re-joined finances to better prepare for this run? Shouldn't they have re-joined finances to better prepare for this run? She's worth at least 100 million, one would think her wealth would be of big help in a Presidential run.
If the reason they have separate finances is because they didn't want to release her corporate information, I think the campaign is in for some trouble. I cannot recall a recent Presidential spouse who refused to release financial information. I think it's VERY likely that she'll be asked to disclose her holdings.
The harder the McCain's push back, the more there is to hide.
February 27, 2008 12:20 AM | Reply | Permalink
Obama may have roots in Africa
also rumored to have fathered a black child
oh, wait, that's next week's smear ...
February 26, 2008 5:05 PM | Reply | Permalink