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Week of 2.29.08

McCain's Financial Dilemma

Congress building with money behind it Is John McCain in danger of having to hold "press conferences from his front yard," as political strategist Joe Trippi suggested to NOW on PBS this week? The Republican frontrunner may have access to only limited funds this summer thanks to a government campaign finance program that prohibits a candidate from spending any privately raised funds. The Federal Election Commission is unlikely to rule on the matter before Election Day, but nonetheless doubts have been raised about whether McCain violated any campaign finance laws.

McCain faces this predicament because last year, when his campaign was low on cash, he applied to participate in the taxpayer-funded public financing program. (Find out more about the public financing program for presidential candidates.) He never received any money from the public program, and after his fundraising picked up steam following victories in the early 2008 primaries, he decided to withdraw from the program.

A Questionable Loan

However, the Federal Election Commission, which administers the public financing program, may not permit McCain to withdraw because of two bank loans totaling $4 million that he obtained to fund his campaign. Questions have arisen about whether he obtained the loan using public funding as collateral. If so, that would constitute accepting public funds.

The Democratic National Committee alleged in a letter to the FEC that he did. The McCain campaign disputes these charges, saying it used the promise of the senator's fundraising potential as collateral.

The chairman of the FEC, David Mason, has told McCain he cannot withdraw from the public finance system until he answers questions about this loan. The Washington Post reports that McCain's lawyer, Trevor Potter, who also happens to be a former FEC chairman, gave the FEC a letter from the bank's lawyers stating that "both parties were careful to avoid using the federal matching money as collateral." Former FEC commissioners and FEC legal experts offer different opinions of whether McCain has violated the law in securing the loan.

Disarray at the FEC

Not only must the McCain camp assure the FEC that it did not use public funds as collateral for its $4 million loan, but the FEC chairman has also warned McCain that he cannot withdraw from the public financing system until he receives FEC approval to do so. Getting the FEC to rule on any matter right now is impossible because the FEC is operating with only two members of what is supposed to be a six-member commission. Four members are required to constitute the necessary quorum to conduct official business. The confirmation of four of its members have been held up in the Senate since December in an ongoing, contentious debate.

The McCain campaign and some FEC legal experts believe no official FEC action is required for him to withdraw from the system.

What's Next?

If a decision is made that McCain cannot withdraw from the program and must follow its rules, McCain would be forced to run the rest of the primary season, up until the GOP convention, using the extremely limited funds allowed by the program. Obviously, this would put him at a great disadvantage as his Democratic rivals, free from any restrictions, would have far more money to spend.

However, the FEC is powerless to punish McCain right now, even if he has violated campaign finance laws. Any action is likely to come after the FEC is fully reconstituted, which could be months or years from now. In the near term, the greatest damage to McCain is the appearance of impropriety, if voters believe that the man known for crusading for ethical campaign finance has himself compromised those ethics.

For updates on this story, check the following resources:

» Election Law Blog

» Politico