McCain's Borrowing on His Ability to Extort

Focus for discussion = Robert Kuttner's "The Squandering of America: How the Failure of Our Politics Undermines Our Prosperity" (Alfred A. Knopf 2007) - available at your local library or from Amazon.com for $17.79 ($14.89 used) + shipping
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johnkarls
Posts: 2034
Joined: Fri Jun 29, 2007 8:43 pm

McCain's Borrowing on His Ability to Extort

Post by johnkarls »

McCain's Donor List
Wall Street Journal – February 14, 2008 – Third Editorial

Banks have made loans against some dubious collateral lately, but John McCain's fund-raising list? That was the security the candidate put down when he took out a $3 million loan in November to get his then-struggling campaign through the primaries. There's a lesson here about campaign finance reform.

Mr. McCain's candidacy was by last fall in serious trouble, his campaign coffers having drained away. Desperate for cash, the McCain campaign went to the bank for a loan -- in this case Fidelity & Trust Bank of Maryland, which lent $3 million on the strength of Mr. McCain's willingness to document his fund-raising prowess.

The Arizonan is one of the most influential members of the Senate Commerce Committee, which regulates much of American business, and he would remain powerful even if he lost his Presidential bid. With industries lining up to pay protection money to committee Members, Mr. McCain would not be short of donors to help retire his Presidential campaign debt. Subprime he is not.

According to Federal Election Commission regulations, loans to candidates must be made "in the ordinary course of business." That means market interest rates and the same repayment terms that a similarly situated non-politician borrower would face. Along with a donor list, Mr. McCain also put up a life insurance policy and other campaign assets. Though the bank could have conceivably sold or rented the donor list if Mr. McCain failed to repay the loan, the market value would have been significantly less than with the Senator throwing his political weight behind it.

The Senate has strict ethical rules about mixing the powers of office with re-election tactics. Cleta Mitchell, a lawyer who specializes in campaign finance law, says that by pledging his fundraising lists as collateral, Mr. McCain "used his position in the Senate to receive treatment not available to others." Other experts disagree that this crossed an ethical line. However, there's no doubt the November cash infusion helped Mr. McCain survive long enough to compete and win in New Hampshire, and ultimately to become the GOP's presumptive nominee.

The McCain campaign argues that there is nothing illegal here, and that this has become fairly common practice. But this was not Mr. McCain's line in his moralizing heyday while trying to pass the McCain-Feingold reform bill in 2002. During his last run for President in 2000, he targeted corporate giving and called the system "little more than an elaborate influence-peddling scheme in which both parties conspire to stay in office by selling the country to the highest bidder."

We'll assume none of Mr. McCain's fund raising is "influence peddling." But imagine how much more open and transparent campaign finance would be if reformers like Mr. McCain hadn't built our current maze of fund-raising and spending limits.

Let Americans donate what they want as long as it's disclosed promptly so voters can see who's giving what to whom. Under that system the Senator might have been able to call on a few friends and allies to keep him going, rather than invoke his ability to tap all of those high bidders who beseech the Commerce Committee. Our readers can decide which system is more, or less, corrupt.

Pat
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Responding to the WSJ

Post by Pat »

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I've hesitated to react to the WSJ position set forth in its foregoing editorial.

Especially since it was posted on this bulletin board solely for the purpose of documenting that John McCain had kept his campaign alive last fall by borrowing from commercial banks USING AS COLLATERAL HIS LIST OF CAMPAIGN CONTRIBUTORS WHO THE COMMERCIAL BANKS IMMEDIATELY RECOGNIZED AS THE SOURCE OF "PROTECTION MONEY" (THE WSJ'S OWN TERM) THAT McCAIN COULD EXTORT!!!

However, the WSJ's position is disingenuous for two reasons.

First, it does not even address "contributions" (aka bribes) to the "independent" 527 organizations!!! Indeed, the WSJ would be the first to howl that requiring any disclosure from 527 organizations would be a violation of their First Amendment "free speech"!!!

Second, even with respect to the contributions (aka bribes) that are made directly to a candidate's campaign, disclosure usually occurs too late to do any good, and it only lists the contributor and the amount BUT NOT WHAT THE CANDIDATE IS AGREEING TO DO (OR REFRAIN FROM DOING) IN EXCHANGE!!!

To really understand the second part of the second point, one has to ignore the legal "requirement" that there are small limits on the amount that an individual can contribute to a particular candidate. Because each lobbyist is in fact a "bundler" -- representing a client such as a corporation or a labor union or a whatever!!! The lobbyist then collects the "contributions" from the multitude of individuals associated with the corporation or the union or the whatever AND OFFERS THEM TO THE CANDIDATE IN EXCHANGE FOR SPECIFIED ACTION/INACTION IF THE CANDIDATE IS ELECTED!!!

The only meaningful disclosure if one were even to consider the WSJ position seriously would be to show each candidate's "contributions" (aka bribes) BUNDLER-BY-BUNDLER and then TO DISCLOSE PRECISELY THE SPECIFIED ACTION/INACTION TO WHICH THE CANDIDATE HAS AGREED IN EXCHANGE FOR EACH BUNDLE OF BRIBES!!!

But don't bother writing a Letter to the WSJ Editor asking whether they would be willing to expand their proposal to include such requirements!!!

And don't be surprised (much less appalled) at the value of what pols agree to do or refrain from doing in relation to the amount of the contributions/bribes that the accept!!! It usually rounds DOWN to zero cents of bribe to the value of the governmental action/inaction, rather than rounding UP to one cent of bribe to the value of the governmental action/inaction!!!

solutions
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Probable Illegality of McCain's Borrowing

Post by solutions »

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Upon reading the foregoing items, it has struck me as odd that banks would accept as "collateral" for a loan to John McCain's campaign, his list of contributors that the Wall St. Journal says the banks immediately recognized as sources of contributions/bribes (which the WSJ termed "protection money" or, in other words, extortion).

I am embarrassed to admit that it has taken me so long to realize why the banks accepted the contribution list as "collateral"!!!

And without checking the U.S. Criminal Code, I am 99% sure that the answer lies in an old "loop hole" that used to exist with respect to the prohibition against corporations making contributions to political candidates (though they, of course, can contribute to "independent" 527 organizations pursuant to their "free speech" right per the Supreme Court). The "loop hole" also enabled individuals to circumvent the limits on their campaign contributions.

The "loop hole"???

Simply call the illegal campaign contribution a "loan" and then write it off later as a bad debt. After all, candidates do not guarantee loans to their campaigns and, consequently, have no personal liability for the loans.

A campaign-finance reform (10-15 years ago if memory serves) outlawed this "loop hole"!!! Though the reform exempted what were thought to be legitimate loans -- loans that were secured by collateral. Which is why McCain's banks were "bending over backward" looking for something that they could call "collateral" with, hopefully from their viewpoint, a "straight face"!!!

And they are probably correct that a "protection money" (extortion) list is in fact collateral!!!

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