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FEC Poses Fresh Problem for McCain

Updated 1:11 p.m.
By Matthew Mosk
Just when things seem as though they couldn't get worse for Arizona Sen. John McCain comes a letter from the Federal Election Commission, alerting him to the possibility that he may not be able to withdraw from the presidential public financing system.

McCain applied to be certified for federal matching money last year, when his campaign was running on fumes. But unlike former North Carolina senator John Edwards, McCain never actually took the federal funds. He was merely preserving that option. Once his campaign started to take off, he wrote to the FEC requesting to withdraw from the program.

The reply from the FEC (PDF), dated Feb. 19 and released by the FEC today, will almost certainly come as a shock to the campaign, which assumed McCain had withdrawn from the public system two weeks ago and was now free to spend money without regard to federal limits.

The reason this matters so much? Life within the public financing system, in which candidate contributions are matched with federal funds, comes with severe spending restrictions. Most notable among them is an overall spending cap of $54 million that would hang over the campaign until McCain officially accepts his party's nomination at the Republican National Convention in September. McCain has already spent $49 million, according to a report his campaign filed this week, though some of that could be backed out under various exemptions.

Still, the spending restriction would create an enormous crisis for a campaign that had planned to raise and spend huge volumes of money over the next six months.

The explanation for the FEC's letter is twofold. Number one, it says, the FEC will need to vote on his request to withdraw. But the FEC has not had a quorum since New Year's Day, when Congress deadlocked over four pending nominations from President Bush. Without a quorum to vote on his request, the letter says, he will have to remain within the system.

The second issue is more complicated. It involves a $1 million loan made to McCain in January by a Bethesda bank, for which he attempted to use possible future federal funds as collateral.

McCain's attorney has argued that the loan was careful to never put up as collateral the campaign's current request for federal funds. The lawyer, Trevor Potter, told the Associated Press that he believes McCain has withdrawn from the system, that McCain will not adhere to spending limits, and that the FEC can't stop him. Potter said the campaign did not encumber the public funds in any way.

"Well, it was done before in another campaign.... We think it's perfectly legal. One of our advisers is a former chairman of the FEC, and we are confident that it was an appropriate thing to do," McCain said in a news conference Thursday.

But the FEC is requesting the McCain campaign present the government with more information about the loan before it can decide whether McCain will now be locked into the federal system.

By Web Politics Editor  |  February 21, 2008; 12:12 PM ET
Categories:  John McCain , The Green Zone  
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