The Time Bomb in Hillary Clinton's Bank Account

There are all kinds of arguments being made as to why Barack Obama might want to help Hillary Clinton pay off her campaign debt--party unity, goodwill, etc. But there's no small amount of urgency on Clinton's part, thanks to a little-noticed provision of the 2002 McCain-Feingold campaign finance law. As just about everyone now knows, the Clintons have loaned her campaign a whopping $11.4 million.

Here's how the law works with regard to personal loans:

PART 116 - DEBTS OWED BY CANDIDATES AND POLITICAL COMMITTEES

116.11 - Restriction on an authorized committee's repayment of personal loans exceeding $250,000 made by the candidate to the authorized committee.

(a) For purposes of this part, personal loans mean a loan or loans, including advances, made by a candidate, using personal funds, as defined in 11 CFR 100.33, to his or her authorized committee where the proceeds of the loan were used in connection with the candidate's campaign for election. Personal loans also include loans made to a candidate's authorized committee that are endorsed or guaranteed by the candidate or that are secured by the candidate's personal funds.

(b) For personal loans that, in the aggregate, exceed $250,000 in connection with an election, the authorized committee: (1) May repay the entire amount of the personal loans using contributions to the candidate or the candidate's authorized committee provided that those contributions were made on the day of the election or before; (2) May repay up to $250,000 of the personal loans from contributions made to the candidate or the candidate's authorized committee after the date of the election; and (3) Must not repay, directly or indirectly, the aggregate amount of the personal loans that exceeds $250,000, from contributions to the candidate or the candidate's authorized committee if those contributions were made after the date of the election.

TRANSLATION: If she loses this race, and hasn't raised enough to pay herself back by the time Obama becomes the official nominee at the Democratic Convention in August, she's out for all but $250,000 of it.

UPDATE: A little more clarification of the law seems to be warranted here:

As we've talked about here before, Obama himself has left open the door to helping Hillary Clinton pay off her campaign debts. But this does not mean giving her the money directly, either as a contribution or from his campaign funds. Obama, like everyone else, is limited to giving a federal candidate $2,300 in each the primary and the general election; his PAC may donate $5,000 to other federal candidates. What most people anticipate is that he would help her pay off the debt by asking his own contributors to chip in (with new contributions), or perhaps headlining a fundraiser or series of fundraisers for her.

As to the personal loan that she has made: Rich candidates have often loaned themselves money, and then asked their contributors to make them whole. If that is done in the course of a campaign, it may simply be a measure of how enthusiastic people are about someone's candidacy. What the McCain-Feingold law aimed to stop was deep-pocketed pols making themselves a big loan, and then--after (presumably winning) an election--going back and pressuring people to give them money to pay back the loan. Even if she loses, Hillary Clinton will still be a Senator after all this is over; there will be plenty of special interests who might see it in their interest to help her through this financial squeeze.

A number of commenters have noted that the Clintons are better able than most people to take an $11-million hit (and Bill probably could make it back in speaking fees relatively quickly). But it is nonetheless a lot of money. Certainly, even people of the Clinton's means would presumably feel no small amount of urgency to getting some assistance before the convention, after which point they would be saying goodbye to all that money.

Hillary Clinton has another source of funds as well: The money she raised for a general election campaign that is looking very unlikely to happen. Here's what the Center for Responsive Politics said can happen to that money, from a report it wrote last January:

The money the candidates have raised for the general—which will probably turn out to be even higher when year-end reports are filed Jan. 31—is equivalent to the cost of putting 28,000 new Apple computers in schools that need them, buying a McDonald's Big Mac for every resident of Michigan or donating the entire Harry Potter book series to nearly every household in New Hampshire and Maine.

The candidates who drop out of the race or end up losing their party's nomination won't get to use their leftover money for anything of the sort, however. Instead, under the Federal Election Commission's rules, candidates can either refund the money to their donors within 60 days after the person is no longer a candidate or get permission from their donors to re-designate it for use by the candidate's campaign for another federal office. To pay off debts from their primary campaigns, candidates can tap general-election funds from contributors who didn't max out in the primary*, with the donor's permission.

If, for example, Hillary Clinton doesn't make it to the general election season, she'll have to go back to the donors who've given her at least $16.7 million toward November's election and get their permission to use it to pay off primary debts, transfer it to her Senate committee or use it in a future presidential campaign.