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CAMPAIGN '08: RACE FOR THE WHITE HOUSE

Clinton may need Obama's help with her campaign debt

She owes $21 million, more than half to herself. Historically, winners have helped bail out their rivals.

May 14, 2008|Dan Morain | Times Staff Writer

An unwelcome legacy of Sen. Hillary Rodham Clinton's faltering campaign for president is a $21-million debt, half from her own pockets, and some political insiders think she may have to turn to her political nemesis to help resolve it.

"The ultimate winner often helps the penultimate winner repay debt," said Chris Lehane, a former Clinton White House aide, who is not part of Sen. Clinton's campaign. "I'm not aware of anyone having those conversations. But historically, candidates have helped others deal with their debt."

Her opponent, Sen. Barack Obama, told reporters in Oregon recently that he intended to have "a broad-ranging discussion with Sen. Clinton about how I could make her feel good about the process and have her on the team." He has said he doubts Clinton is remaining in the race because of any financial incentive.

But Obama is the unquestioned fundraising leader of the 2008 campaign, having raised more than $240 million. At the end of March, he had $51 million in the bank. He cannot transfer money to Clinton, but he could request that his contributors donate to her to help pay her debts. Some Obama donors said they would consider helping.

"As much as I dislike how Hillary Clinton has run this campaign, I think it would be worth it to heal the wound," said Los Angeles Democratic activist Richard Jacobs, an Obama backer. "If he says it is a good idea, I think a lot of people would feel the same way."

A major Obama fundraiser, who was not authorized to speak and requested anonymity, said: "First she has to drop out. . . . There are some people who would rather give to a Republican than to Hillary Clinton. But not me. I'm a team player."

Obama and Clinton aides say there has been no talk of a deal. "She expects to be the nominee, and so it is premature and inappropriate to even discuss it," Clinton strategist Howard Wolfson said.

Still, there is precedent for winners to help losers. Clinton's donors helped former Iowa Gov. Tom Vilsack pay off his presidential campaign debt. Sen. John McCain's supporters helped Sen. Sam Brownback (R-Kan.) pay his debt, though it was in the tens of thousands, not tens of millions.

Clinton has two types of debt -- personal and what she owes to vendors. Her debt to vendors stood at $10.3 million at the end of March, including $4.5 million to the firm co-founded by Mark Penn, formerly her top strategist. She borrowed $11.4 million from herself.

Clinton is not without resources. Anticipating she would be the nominee, Clinton amassed $22 million for the general election. That money cannot be used directly for her primary debt. But she could ask donors to redirect those contributions to another campaign -- for example, an account for 2012 when she would face reelection to the Senate.

Clinton then could transfer the debt to her vendors to that account and use money formerly designated for the presidential race to pay them.

Former Federal Election Commission Chairman Robert D. Lenhard said that although Clinton could engage in such a two-step to pay off her debt, he would recommend a more straightforward path: simply keep her presidential account open and raise money into it from her perch in the Senate.

"She will be in the Senate for a long time and could raise money and pay down the debt," Lenhard said. "When campaigns end with a lot of debt, fundraising goes on, and there is some renegotiating with vendors."

A major Clinton fundraiser, speaking anonymously, raised another possibility. Clinton could return checks to her general election donors and ask that they write new checks to Obama. Such a gesture would make it easier for Obama to ask his donors to help Clinton.

"There wouldn't be a dollar-for-dollar exchange," the Clinton fundraiser said. "But it would make it easier for Obama to ask his donors to help Clinton."

Clinton's debt would be less of a problem if Obama were to pick Clinton as his running mate. Although few pundits think he would choose Clinton, she would not arrive to the ticket empty-handed. She could use the $22 million in general election money to help fund an Obama-Clinton ticket in the fall campaign, election law experts say.

Under federal law, Clinton must act by the end of the primary season if she is to recover the $11.4 million she lent her campaign. Once Democrats select their nominee at the August convention, Clinton would be limited to repaying herself $250,000, according to a provision of the law co-sponsored by McCain, the presumptive Republican nominee.

Before the 2002 campaign finance overhaul, federal candidates who won office could hold fundraisers to retire their personal debt. That created the unseemly situation in which politicians could directly benefit from donors' largess.

"There was a desire not to have elected officials raise money from lobbyists and others that goes directly into their pocket," said Fred Wertheimer of the Washington nonprofit group Democracy 21, which advocates for campaign finance regulation.

Wealthy candidates commonly loan themselves money, knowing they won't see it again. An aide to failed Republican presidential candidate Mitt Romney said Tuesday that Romney did not expect to collect any of the $44.3 million he lent his campaign.

"Candidates putting personal money into a campaign is like Vegas money," said Lehane, the former Clinton White House aide. "It is nice if you get it back. But you take it out of the bank expecting not to ever see it again in return for getting an opportunity to try to play a winning hand."

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dan.morain@latimes.com

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