Before he won the New Hampshire Primary, the political future of John McCain was in serious doubt.
In October, his campaign for president had just $3.4 million cash on hand (with much that money reserved for the general election) and a debt of $1.7 million from overdue credit card payments and unpaid bills.
By November, McCain’s financial worries were so serious that he negotiated a $3 million loan to keep his campaign afloat.
By December, he was broke again, and McCain went back to the banks, asking for another $1 million to keep campaigning. And this time, the lenders told him they needed some collateral.
Knowing that cash would be a problem for the nomination contest, McCain had earlier opted into the national public financing system, and the Federal Election Commission had already certified that he was owed $5.8 million in public matching funds. He also used the FEC certification to get on the ballot in several late-primary states, including Ohio, instead of paying canvassers to collect signatures.
But in the primary process, public financing is a loser’s bargain. If he ultimately chose to accept the federal money, McCain wouldn’t receive any of those funds until March, and even more seriously, he would be limited to a total spending cap of $54 million until he became his party’s nominee at the Republican National Convention in September. Accepting the funds would put him at a major strategic disadvantage in the general election.
Those facts left McCain with a decision to make. Even agreeing to put up the matching funds as collateral for a loan would have forced the campaign to adhere to the spending limits. So, once he started winning primaries, he planned to opt back out of the system and raise private money until he was the Republican nominee. There was a precedent for that — Richard Gephardt had been allowed to do the same thing four years ago.
But to get the new $1 million loan immediately, he and his lawyers tried something clever — they told the bank that if money again became a problem, they would opt back into the public financing system, accept the public funds from the FEC in March, and use that cash to pay back his loans — even if he had suspended his campaign for president.
And there is no precedent for that particular opt-in, opt-out, then maybe opt back in–legal maneuver.
On February 6, with the GOP nomination all but locked up and the money again flowing, McCain formally notified the FEC of his plans to withdraw from the presidential public financing system.
On Thursday, FEC Chairman David M. Mason, a Republican, issued the commission’s response. The letter is available here.
He told the campaign that McCain can’t withdraw from the public financing system for the primaries until the FEC gives him permission to do so. It cannot do that until it has enough members to maintain a quorum.
Right now, there are only two appointees serving on the commission, and the Senate and President Bush continue fight over the nominees. With four vacancies, the FEC isn’t in a place to make any decisions of any kind. It doesn’t have enough members to make any sort of binding decision or impose fines on anyone. The way things stand now, that leaves a lot of grey in the world of campaign finance.
But even with only two active members, the FEC asked McCain to explain his rationale for why using the promise of public funds to secure his loan did not actually commit him to using those funds. If the commission could issue a decision on McCain’s situation tomorrow, there is no guarantee that they would choose to release him from his commitment to public financing.
On Monday, the Democratic National Committee got into the act. Chairman Howard Dean announced that he would be filing a formal complaint with the FEC to demand that John McCain remain committed to the campaign finance rules.
That same day, McCain’s lawyers told the FEC that he did not need their approval to withdraw from the public finance system. Lawyers for his bank reinforced his claim that he never technically promised public money as collateral.
Now we’re at an impasse, again, and one where there is no clear precedent.
McCain has already spent $49 million in the primary, meaning that if he is forced to adhere to the spending limits, his campaign must essentially cease all activity until he becomes the nominee 6 months from now. If he were to continue to operate in clear violation of the spending limit, McCain could be in legal jeopardy — potentially subject to fines and up to five years of jail time.
His lawyers have the option of taking the FEC to court, but as Rick Hasen has pointed out, there’s no way of knowing what authority the judicial system has over an FEC without quorum. We simply don’t know if the courts have the power to order the commission to make a decision as it is currently composed or to somehow make its own decision from the bench.
But this much is clear: If there exists even a hint of a possibility that John McCain might be willfully violating election laws, he has a real image problem. His name is synonymous with the cause of campaign finance reform, and he owes his good press clips to a reputation as a “straight talker.” Deceptive manipulation of the campaign finance system would not go over well. Moreover, the controversy undercuts his frequent attacks on Barack Obama for equivocating on earlier statements that he would accept public financing for the general election. That’s why Howard Dean is working to exploit the issue and make voters aware of it. If this legal process drags on, it has the potential to make him both a hypocrite and, ultimately, a loser.