To be accurate, the title is probably wrong: We don't know McCain's credit score, he might not be in the 'sub-prime' category. But people call the junk loans based on lies and promises subprime these days, so why not?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.
Cleta Mitchell, a veteran campaign finance lawyer and a McCain critic, said she has never encountered a similar agreement.
"They've clearly got a sweetheart deal with this bank," Mitchell said. "This bank is just a cash register for them."
Watkins, the bank president, said the terms of the McCain loans were novel, but only because the campaign finance rules have changed over the years. He said he and the other bank trustees have a long history of lending to political committees of both parties, including loans to the presidential campaigns of Democrat Walter F. Mondale and Republican Robert J. Dole.
"Over the years, we developed an expertise on ways to meet federal banking regulations and FEC requirements," Watkins said. "We've done everything in accordance with all the standards." Members of the bank's board of directors have made campaign contributions to candidates in both parties but none to McCain.
McCain's victories in the early primaries meant he never had to enter the public financing system. He formally returned his certification to the FEC on Feb. 6.
That decision has not stopped McCain from pushing for an agreement with Sen. Barack Obama (D-Ill.) that, if the two became their parties' nominees, they would return to public financing for the general election.
Last spring, an Obama spokesman said that the Illinois Democrat would "aggressively pursue an agreement with the Republican nominee to preserve a publicly financed general election," and McCain told reporters yesterday that Obama should "keep his word to the American people."
"If Senator Obama goes back on his commitment to the American people, then obviously we have to rethink our position" on public financing, McCain said in Oshkosh, Wis.
Under the federal campaign finance system, after a political party nominates a presidential candidate at its convention, the nominee becomes eligible for $85 million from a fund provided by taxpayers but would be barred from raising additional money.
Candidates have abided by these limits in the past, but no campaign has created the kind of fundraising machine that Obama has.
Obama said in Milwaukee: "If I am the nominee, then I will make sure that our people talk to John McCain's people to find out if we are willing to abide by the same rules and regulations in respect to the general election." But, he added, "it would be presumptuous of me to start saying now that I'm locking myself into something when I don't even know if the other side is going to agree to it, and I'm not the nominee."
It's amazing though. 'I need more cash out of my house-ATM.' 'There's no collatoral for more.' '....I'll sue someone!' 'Well, sure, if you win. If you don't?' '...I'll go on public financing!'
Several months later, he demands his presumptive opponent do the same...
