McCain's Money Problem
It's not that he's out of it, it's that he got it with his lists.
By Erick Posted in 2008 — Comments (28) / Email this page » / Leave a comment »
Someone is pushing what could be a damaging story about John McCain.
A lot of of us have been wondering how McCain was able to float his campaign during his months in the wilderness. We knew he got a bank loan, but what was the collateral?
The Politico reports that McCain used his fundraising list as collateral. That's problematic for him because, as the Politico notes
The privacy policy on Arizona Republican's website states: “John McCain 2008 will not sell your information to third parties or any commercial entities.”Fundraising lists are valuable political commodities, since they offer the possibility of millions of dollars in contributions. And campaigns routinely rent or trade them.
McCain’s use of his list as collateral, however, could open the unlikely possibility of donors suing his campaign for breach of contract.
Already I've had a couple of people send this to me questioning John McCain's sincerity. He's for campaign finance reform, but his conduct in this is questionable.
Naturally, of course, Keating 5 is a buzz word being bandied about today with this story.
I did ask John McCain's campaign if they had a response to any of this. I was told they would not be commenting. This is a wonky story, so it might not get any traction, but if one of the other camps can get an aggrieved contributor, you never know. With McCain backing some campaigns in a corner, he better watch out.
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McCain's Money Problem 28 Comments (0 topical, 28 editorial, 0 hidden) Post a comment »
I once smiled at and shook hands with Barack Obama (gasp)....
"I believe in grace, because I have seen it. In peace, because I have felt it. In forgiveness, because I needed it."
-George W. Bush
Not ruling it out altogether, but the Politico was the same org that broke the bogus Thompson withdrawal story.
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NARF
Thats a breach of contract there. If I'm a campaign donor and the candidate says he will honor my privacy by not selling my name to a third party and he does, thats a breach of contract. The Last thing I need is to get calls from telemarketers or survey groups who got my name off a list of donors to a candidate.
McCain's camp should have known better than to do this because now they're in a bind, do you honor your bank loan or your donor's privacy?
...he probably covenanted that his creditor would store the collateral in escrow and sign a non-disclosure agreement, contingent on performance of the note. So far, no breach of confidentiality.
If his campaign were then to default on the note, the creditor would seize the collateral from the escrow agent and the NDA would end.
At that point, the McCain campaign would presumptively have breached any confidentiality they had promised to their donors, but they'd have much bigger problems by then (being out of money), so who cares?
It's a little... um, creative, but I don't think it's necessarily a dealing in bad faith.
I am not a lawyer. Plenty of people on this site are, so feel free to tell me I'm wrong.
I am an investor, though. If someone like McCain brought me a valuable mailing list as collateral, part of my due diligence would be to determine whether the list was encumbered with a confidentiality covenant, and discount it appropriately.
I'm now asking myself if my i's were dotted and my t's crossed, but I probably made the loan at least as much on the strength of the borrower's character (and my hope of being in his good graces in the future) as on the real value of any collateral. It's that hope that makes the loan questionable in an ethical sense.
Jeremiah 17:9.
I'm not aware of any commercial bank that lends on the strength of the borrower's character. :-)
You'll probably go quoting J. P. Morgan's famous Senate testimony to me, but banking has changed a lot since his day.
Investment banks consider the relationship value of a debtor, but they have pretty strict collateral standards too.
Given all that, I'm having a hard time imagining who might have made this loan to McCain. Possibly a group of individuals with whom he has close ties?
I'm having a hard time imagining who might have made this loan to McCain. Possibly a group of individuals with whom he has close ties?
I sure hope this wasn't an illegal corporate campaign donation in disguise... where's a CFR crusader like McCain when you need him? Oh that's right, never mind.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman
[I have to post links to my diaries in other threads -- about entirely different topics -- because nobody will ever read me otherwise!]
McCain will do either one of two things. He will crash and burn, in which case he will take the matching funds for which he has already qualified to pay off whatever loans he has OR he will do well in which case he'll get all the donations he needs. He's not going to turn over his donor list in either case - this was just the least complex way to get the money. I see no story here.
Too inside baseball and wonkish. Also, McCain's campaign is actually pulling in the money at a very healthy clip at this point, so it would only become an issue if he loses the nomination, an event that is looking less and less likely, not withstanding Fred's very strong debate last night.
Regardless of whether this is true or not, I encourage everyone, but epecially those under 35, to read up on the Keating 5, especially if you support McCain.
The Dems and MSM will make this a story. If he disclosed lists, it's a total breach of trust eithically.
McCain will get kid glove treatment from the MSM until he wins the nomination. Once he does watch for every vulnerability he has to be shouted from the rooftops. In this regard, 2008 reminds of 1996. Every candidate who might have given Clinton a tough run-Alexander, Forbes, and Gramm-were each undercut at key moments. This helped keep the weakest candidate (Dole) out of danger until he secured the nomination. Then the deluge began.
What I don't get is how that donor list is valuable enough to serve as collateral for any kind of significant loan. Or is this just a way for the lender to make an questionable campaign contribution? Would this lender have made the same deal with a business or individual? Seems doubtful to me.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman
I think the bank would consider the list to be an asset to which they can sell off to help recover the defaulted loan amount. I'm not sure on that though.
Though it's certainly a severely impaired one, given their privacy policy, and even unimpared I'm not sure it's worth a whole lot. It is as if someone gave his campaign a $300,000 loan against an 88 Honda Civic they don't even have a clear title on... sounds like a campaign contribution by another name to me.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman
The big if which I don't see addressed in the "story" or any comments here is "if he actually even disclosed anything."
You put your house up as collateral for a mortgage and your car for financing for that. That doesn't mean that the lending institution must possess your house or your car. We have no clue what the arrangement is here EVEN IF he did in fact use the list as collateral.
Another if - even if he did use the list as collateral, and did give the bank a copy of the list - the bank has no "ownership rights" to that list unless and until they "foreclose" on the collateral due to non-payment or breach by the McCain Campaign of the terms of the loan. So if the bank releases that information at any time before they are granted "legal title" in an action against the campaign, then they themselves are liable for damages - in all liklihood they would be responsible for any and all "damages" that the Campaign pays to individuals on the list (as a result of their actions) and would, in addition, probably face a claim for damage to the Campaign itself as the bad press (previewed in this story and post) would hurt McCain personally and his campaign.
As noted in another comment, I doubt that this loan will ever be defaulted - McCain will succeed and be rolling in it, or he will fail and take matching contributions to pay it off. Which leads to a second point - even if he defaults it will almost certainly be AFTER he has failed in his bid (be it at the nomination or general election stage), and at that point, exactly how concerned will he be about the "bad press." Even the breach of contract actions by contributors are not necessarily on "slam dunk" legal footing.
Would you worry if I put your house up for collateral for a loan for myself? After all, you're not going to lose your house unless I default on the loan.
McCain has a contractual obligation to not sell his voting list. Using something you can't legally sell as collateral on a loan seems nearly as fishy to me as me using your house for collateral.
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Finrod's First Law of Bandwidth:
A picture may be worth a thousand words, but it takes the bandwidth of ten thousand.
And I've only donated small amounts here and there to a few candidates. I don't know how valuable those lists really are when I bet 90% of the people are on another list already.
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Two thirds of the world is covered by water,
the other third is covered by Champ Bailey.
I really don't think this story is one of them.
Fred!
[I'm a little threadjacker, oink oink oink
oink oink oink oink oink oink]
There is more to this... Could they be that stupid?
"I believe in grace, because I have seen it. In peace, because I have felt it. In forgiveness, because I needed it."
-George W. Bush