A new way for politicians to make money
Betsy's Page
They can loan their campaigns money at exorbitant rates of interest and then pocket the difference as they get donors to give them money to pay back the loan.
<<< During a decade in Congress, California Representative Grace Napolitano has pocketed more than $200,000 of political contributions by charging as much as 18 percent interest on money she loaned to her own campaign.
The suburban Los Angeles Democrat made the $150,000 loan in 1998, when she was first elected to the U.S. House of Representatives. Through Dec. 31, her campaign committee has used donations to pay Napolitano $221,780 of interest while reducing the principal by just $64,727, a review of her Federal Election Commission filings shows.
As recently as June 2008, Napolitano held a fundraiser asking supporters and political action committees for money to pay down the 1998 debt. Napolitano, her spokesman and her campaign’s lawyers didn’t respond to requests for comment.
“I find this practice quite reprehensible,” said Craig Holman, government affairs lobbyist for Public Citizen, a Washington advocacy group. Interest payments from Napolitano’s campaign treasury have “proven exorbitantly profitable,” he said. “Candidates are not supposed to personally benefit from these campaign funds.”
The Federal Election Commission in 1999 ruled the loan and its 18 percent rate were allowed by U.S. election laws, after a complaint by Napolitano’s 1998 Democratic primary opponent. The commission agreed with Napolitano’s explanation that the interest charges were justified because Napolitano had to pay penalties for taking the money from a retirement account. >>>
Her loan to herself even outperformed the stock market.
<<< For Napolitano, a 72-year-old grandmother of 14, the campaign IOU has been a profitable asset, far outperforming stocks since the loan started accruing interest in May 1998. Over the same period, an investment in the Standard & Poor’s 500 stocks, with reinvested dividends, would have lost more than 7 percent, according to Bloomberg data. >>>
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