McCain at odds with federal regulators

February 22, 2008 4:54:43 PM PST
Republican Senator John McCain might well ride out his standoff with federal regulators over his withdrawal from public financing for the primaries. The contretemps, however, could haunt him in the general election.

The Federal Election Commission's decision to challenge McCain has forced the Arizona senator and likely Republican presidential nominee to defy the government's top campaign finance regulator in an area of law that McCain himself has helped seed with regulations.

His defiance, legally defensible or not, threatens to strip him of the moral high ground he needs to level the financial playing field for the general election.

McCain has been trying to hold Democratic Sen. Barack Obama to an agreement made last year that if both become their respective party nominees, both would participate in the general election public finance system.

Obama has hedged, saying the terms he laid out last year were not a pledge. Such an agreement, after all, would force Obama to holster his vastly superior fundraising operation - he has raised $138 million in his one-year quest - and require him to confront McCain on equal financial footing. Under public financing, each candidate would get $85 million in government money and be prohibited from spending any money raised from contributors.

McCain took Obama to task for equivocating, and seemed to be seizing the high road as the candidate most devoted to reducing the influence of money in electoral politics.

Then FEC chairman David Mason wrote him "The Letter."

In it, Mason told McCain that he could not withdraw from the primary public finance system until he 1) answered questions regarding a $4 million loan he obtained late last year, and 2) received approval to withdraw from four members of the six-member commission.

McCain and his lawyer, former FEC chairman Trevor Potter, responded unequivocally: McCain was out of the primary public finance system and the FEC could not force him into it.

"That's not a decision; that's an opinion," McCain said of the FEC's action. He added that the FEC cleared Dick Gephardt to pursue the same course. Gephardt "was in the exact same circumstance; we have precedent for it," McCain said Friday morning in Indianapolis.

"We believe that Senator McCain had a clear legal right to withdraw from the primary matching fund system and he has done so," Potter told the Associated Press. "No FEC action was or is required for withdrawal."

Mason, meanwhile, is wielding a regulatory gun that has no bullets. The FEC has four vacancies and cannot convene a quorum.

That means there are no votes to either stop McCain or give him the go-ahead.

The dispute is not just about legalities. If McCain were forced to remain in public financing in the primary, his spending would be severely limited just as he was turning his attention to his likely Democratic opponent.

McCain sought permission to participate in the primary financing program last year, when his campaign was flagging and his donors were shutting their wallets. McCain retooled his campaign, obtained the $4 million line of credit in late November, won the New Hampshire primary last month and proceeded to vanquish the rest of the Republican field.

Earlier this month, he notified the FEC that he did not need the public financing after all. He noted that he had not used any of the $5.8 million the FEC said he was entitled to receive and had not used it as collateral for the loan. But the terms of the loan said that if he had lost primary contests, he would have had to reapply for public funds and offer them as collateral.

"I fear they may have gotten too clever by half," said Brad Smith, a former FEC chairman and law professor at Capital University Law School in Columbus, Ohio.

Obama, meanwhile, was being clever himself. Last year, in response to a questionnaire, he said he would participate in public financing for the general election if his Republican opponent agreed to do the same. But in recent days, his spokesman has said that assertion was not a pledge, and Obama himself laid out new conditions for how such an agreement could be reached.

"The candidates will have to commit to discouraging cheating by their supporters; to refusing fundraising help to outside groups; and to limiting their own parties to legal forms of involvement," Obama wrote in USA Today this week. "And the agreement may have to address the amounts that Senator McCain ... will spend for the general election while the Democratic primary contest continues."

A number of Democrats say Obama has built too formidable a fundraising base to abandon it for the general election. He has raised an astounding $36 million in January alone and is on pace to beat that number in February.

"In my mind, to give up that advantage is a huge mistake," said Tad Devine, a Democratic strategist who advised John Kerry's 2004 presidential campaign. Kerry and his advisers have said that it was a mistake in 2004 for Kerry to have stayed within the public finance system in the general election.

The leverage McCain had to keep Obama in the public finance system might now be slipping as he challenges the FEC.

"More than anyone else, Senator McCain's name is synonymous with campaign finance reform," Rick Hasen, a campaign finance expert and law professor at Loyola Law School in Los Angeles, wrote in his Web log. "If he's arguably in violation of the law, that will tarnish his reputation. He may be able to make technically correct arguments that he is not in violation, but the smell is bad."