FEC: McCain Used Matching Funds As Collateral To Bank Loan

February 22, 2008 10:39 p.m. EST

Washington, D.C. (AHN) - A week after trying to cripple rival Sen. Barack Obama's (D-IL) record-breaking fundraising efforts, Sen. John McCain (R-AZ) is facing the possibility of his own campaign being handicapped by a Federal Election Commission (FEC) decision keeping him in the public financing system for the rest of the primary season.

The FEC said in a letter to McCain this week that it could not approve the Republican frontrunner's withdrawal for matching federal funds without examining a bank loan made by his campaign late last year.

McCain applied for matching funds in June, when his campaign was struggling with poor poll numbers and few donors. His request was approved by the FEC in spring with $5.8 million in matching funds. McCain withdrew his application early this month after sweeping Super Tuesday, but the FEC said it had to check if McCain had used the matching funds to secure a bank loan.

"The Commission made clear that a candidate enters into a binding contract...The Commission stated that it would withdraw a candidate's certification upon written request, thus agreeing to rescind the contract, so long as the candidate... had not pledged the certification of Matching Payment Program funds "as security for private financing," FEC chair David Mason wrote.

"In preparation for Commission consideration of your request... we invite you to address the following provisions of the loan... between John McCain 2008, Inc., and Fidelity and Trust Bank of Bethseda, Maryland on November 14, 2007," Mason added.

After the review, the Commission will vote on whether to allow McCain to withdraw his application. The vote requires a quorum from the six-member Commission, an impossibility right now since the FEC only has 2 commissioners, and the other four's nominations are still being debated by the White House and Democrat lawmakers.

If he is unable to leave the public financing system, McCain will be restricted to a spending limit of $54 million until August. The Washington Post says McCain's campaign has so far spent $49 million.

McCain has until March 7 to comply with the Commission's request.