Of House Loans and Campaign Loans

There seems to be a great deal of debate made over whether or not McCain pledged his public funding as collateral for the loans he received while his campaign was struggling to survive. Far better minds (and legally trained, too) than my own are pondering this question, and I’m not sure I have much to add. However, as I’m in the process of selling my house right now and potentially buying another, there are a few things that have occurred to me as I’ve been dealing with my own contract and lending issues.

Mainly, I wonder if the problem for McCain isn’t that he may have pledged taxpayer funding as collateral, but instead that he listed them as an asset in order to obtain the loan and then intentionally eliminated the value of that asset by withdrawing (or at least, attempting to do so) from the government funding scheme.

When I filled out mortgage applications some months ago, I listed all assets that could reasonably be expected to be relied on in case I needed to come up with funds to pay the mortgage. Among other things listed by my wife and I were our retirement accounts (IRAs and 401Ks). This is pretty standard stuff, something the bank takes into account when assessing the net worth (and thus the ability to re-pay) of a borrower.

Now, imagine if the day after we listed these accounts as assets, we had cleaned out the accounts to pay for a trip to Vegas. Essentially, we would have materially altered (devalued to zero) not something we had pledged as collateral, but instead something we had offered as evidence of our worthiness to receive a mortgage loan and our ability to repay the loan.

To me, it seems like this is what McCain’s campaign has done (assuming he didn’t repay the loan before withdrawing, or at least attempting to withdraw, from the taxpayer financing program): he has listed an asset on a loan application in order to present his financial situation in the best possible light, and then after receiving a loan that was in part based on the value of that asset, he intentionally reduced that asset’s value to zero.

I don’t know if this issue of listing the government funds as an asset is actually a problem for the McCain campaign, but given the complexity of campaign finance law and the apparent disagreement over whether they can even withdraw from the taxpayer funded presidential campaign program, I imagine whoever holds the campaign check book for McCain would be very reluctant to write the check that puts the campaign over the limit without having clear guidance from the FEC. Something that, of course, is impossible so long as the FEC lacks a quorum.

For those of us who believe in a deregulated campaign finance and political speech regime, this is rapidly becoming Exhibit A in the case against allowing the government to decide who gets to spend how much to promote candidates and discuss issues. Even if everything is resolved in Sen. McCain’s favor, the sheer uncertainty and complexity of the situation can only be chilling to anyone considering participating in government funding schemes in the future.