Clinton's Money

Hillary Clinton's campaign is in a weird situation -- over $7.5 million in debt (not including the campaign's debt to Clinton personally) but they had $29 million on hand at the end of January. Is she just a deadbeat? Hilzoy looks into it and the answer is no, the problem is just that too much of her money is general election cash. Basically, having maxed-out her big dollar donors, Terry McAuliffe's gone back to that crowd and got them to pony up even more money to make her fundraising figures look more impressive than they really are even though that money can't be spent yet.

Meanwhile, it is worth zeroing in on the weird case of Clinton's $5 million self-loan. Right now, there are no campaign supporters who feel strongly enough about Clinton's fortunes that they want to give her that money. But if she wins the election, special interest groups will now be allowed to, in essence, but $2,300 bribes directly into her pocket in order to help her repay the loan. That's gonna be an ugly situation. Keep in mind that even if she had to just eat the $5 million loss, she and Bill would still be a wealthy couple, so it's not as if giving them money would make sense as an act of charity. And they're already be in the White House, already raising money for the re-election, so it wouldn't be much of an act of political activism. It'd just be a way to do a financial favor for the woman who happens to be president.

Comments

No one wants to give her money right now because she's lost 10 states in a row and has the whiff of old milk. If she can turn that around and give people a reason to vote for her, it's not hard to imagine that a lot of people will be excited enough to give money again.

Posted by Tyrone Slothrop | February 21, 2008 8:22 AM

From the politico story hilzoy references:

Clinton’s strapped financial situation in late January meant she couldn’t invest in all of the Super Tuesday states, particularly the expensive ground operations required in caucus states.

Obama's ground operations are largely staffed by volunteers.

Posted by Lucy | February 21, 2008 8:28 AM

Ben Smith is reporting at Politico that:

"Hillary Clinton's $5 million loan to her campaign won't be a total loss for the candidate.

Campaign finance documents filed today show that she's charging her campaign an interest rate of 1.26%.

It's a modest rate which means that -- if she pays herself back with donor contributions -- she still would have been better off putting her money in a savings account at a commercial bank.

Mitt Romney this year did not charge his campaign interest.

Clinton's loan has not, however, been paid back."

more bad news if anyone picks it up.

Posted by BA | February 21, 2008 8:45 AM

What happens to the general election money if she doesn't compete in the general election?

Posted by dbomp | February 21, 2008 8:53 AM

dbomp: It gets returned to the donor.

Posted by dbt | February 21, 2008 8:57 AM

"Campaign finance documents filed today show that she's charging her campaign an interest rate of 1.26%."

This needs publicity. People sending small donations to HRC's campaign should know they are donations towards paying interest to Hillary herself.

Posted by otto | February 21, 2008 9:17 AM

Obama's ground operations are largely staffed by volunteers.

Volunteers need to be bussed to events, fed, provided with voter lists, and coordinated by paid staffers. Don't discount the expenses involved in all of that.

Posted by Tyro | February 21, 2008 9:39 AM

I'm not an accountant, but I suspect that by charging her campaign interest on the loan, HRC is putting herself in a better position, tax-wise, if the loan doesn't get repaid, or the interest doesn't get repaid.

Posted by David | February 21, 2008 9:55 AM

This needs publicity. People sending small donations to HRC's campaign should know they are donations towards paying interest to Hillary herself.

Meh. You might be able to make some political hay out of this, but I have no problem with it whatsoever. If she borrowed money from a bank, they would be charging her more interest. Would that dissuade future supporters as well? B/c part of their money was going to the bank? I think it's a good thing if a candidate is willing to put their money where there mouth is. If the interest rate they're charging is far below market value, it's still costing them personally.

Posted by mpowell | February 21, 2008 12:13 PM

The Clintons are crooks. This is surprising to you how?

Posted by Mike | February 21, 2008 2:02 PM

If Hillary can take 5 million of her own money for her campaign, I don't mind giving as much as I can afford. So, I'll probably go up to the $2300 limit.

Posted by BARB | February 21, 2008 7:07 PM

David may be on to something about the tax implications. From the Politico, Clinton's spokesrep says it's to cover taxes from an imputed interest that IRS will charge HRC:

http://www.politico.com/blogs/bensmith/0208/Clintons_interest.html

This appears to check out when you read the IRS Code, specifically section 7872.

What's interesting to me though is that it may set up HRC to treat non-payment of the loan, should she decide to forget about getting repaid, as a capital loss to set off against her other capital gains.

In other words, if she just gave $5m to her campaign, she's $5m poorer. But instead, if she loans the money following IRS regs for arms-length below-interest loans, and decides later to not get paid, she writes off $5m against any capital gains she and Bill make in the tax year. Bill's cashing out of a partnership, so he'll have a lot of capital gains. Not a bad way to get $1m-plus tax benefit off her donation. The rest of us get no tax writeoffs from political donations.

I'm just speculating though. A tax specialist/accountant should really look into this.

Posted by Brian Schmidt | February 22, 2008 12:45 AM