Politicians Profit off Personal Loans to Campaigns

we the people phrase on a dollar
According to a 60 Minutes report, politicians on both sides of the aisle are lending personal loans to their campaigns and profiting off of the returns.

The payments received from these loans have allegedly been so profitable that politicians have been able to afford NFL game tickets, trips to Europe, and golf outings.

Election Law attorney Gene Berardelli said that the use of personal loans in campaign finance was intended to help out candidates that were self-financing their own campaigns. It was also meant to help keep campaigns going should money run low.

Despite these stop-gap measures, they do not always prove beneficial, even for candidates with deep pockets.

“Take a look at Jon Huntsman’s presidential campaign, he made personal loans of over $5 million,” said Berardelli. “So it goes to show that self-financing isn’t a sure thing.”

Sure thing or not, abuse of campaign finance laws involving personal laws can be difficult to prove.

After all, if personal loan profits were used to buy tickets, fund banquets, or a trip to raise campaign awareness, then it may fit the intent of the law. However, campaign finance remains one of the areas in which location carries great importance.

Not all jurisdictions in the country heavily regulate personal loan lending to campaigns. While all voters wish for transparency, like many political promises, it does not necessarily happen.

Sarah K. Steiner, an election lawyer and private practice attorney, said that very few laws govern personal loan lending in politics.

“There are two kinds of candidates who do this: a fairly wealthy candidate who found something else he or she can make a profit off of, and the other is a desperate candidate who can’t raise money any other way,” said Steiner.

Despite personal lending being practiced by both Republicans and Democrats, Steiner believes that political candidates and officials should not be able to use personal loans in such a way.

She noted that in New York anyone running for mayor or city council has to have their campaign repay any personal loans almost immediately after the election.

While this implies that a personal loan lender won’t be making an ongoing profit for years off of the same loan, it also means that they will be given a cash infusion after the election. In effect, they get a refund on their loan that is likely to include some donor dollars in that refund check.

For example, if a candidate is running for alderman and he lends his own campaign $100,000 at 20 percent interest, in a single year he will make $20,000 from people who are giving campaign contributions — people like voters.

Personal Loan Lending in Politics

Voters aside, elected officials are the wielders of power in democracies. Even though elected officials are not captains of industry, they certainly earn more money than the average American.

“Here in NYC, the position of Member of City Council carries a six-figure salary, yet it is considered a ‘part time’ job,” said Berardelli. “That means that members can have outside employment.”

If politicians are not only earning six-figure income, but have time for second jobs, then profiting off of personal loan lending may be outright avaricious.

Even though it is clear politicians can profit off of campaigns by acting as personal loan lenders, there seems to be little attempt at increasing oversight or re-examination from lawmakers and regulators.

“I don’t think they are particularly concerned that candidates are profiting,” said Steiner.

Since Congress is currently focused on other issues, it may be some time before the rules regarding campaign finance and personal loans are under review.

While each state has its own campaign finance rules, the fact that campaigns are mostly funded by contributions and donations implies that donors will be paying off personal loans, albeit unknowingly.

Steiner summarizes what is likely to be a sobering question every voter will have to face if they discover that candidates in an upcoming election are profiting from their own campaign.

“If a candidate is lending money to his campaign and you are donating to the campaign and it is going to the candidate making a profit, is that really how you want your campaign contribution used?”