SOURCE: Bloomberg.com

Clinton Deadline Looms for Recouping $11 Million Personal Loan

By Jonathan D. Salant and Timothy J. Burger

May 12 (Bloomberg) -- Hillary Clinton may have a financial incentive to remain in the presidential race for a while. And she has Senator John McCain to thank for it.

Clinton loaned her struggling campaign $11 million in recent months. A little-known provision of a 2002 campaign- finance law cosponsored by McCain prevents candidates who drop out of the race from raising money after the nominating conventions to repay themselves for personal loans.

Should Clinton fail to come up with the funds by the Democratic convention in August, she'll be out the $11 million. If she quits the campaign before then, she may find it hard to get people to keep giving cash just so she can retire her debt.

That may ratchet up pressure on Clinton to cut a deal with rival Barack Obama to help her through his supporters. Obama may oblige since he would love to get her out of the race for the nomination so he could focus on the general election.

``Helping to pay off the debt would certainly be a clear signal of Obama's desire to bring the two candidates together,'' said Anthony Corrado, a professor of government at Colby College in Waterville, Maine.

Obama, 46, is keeping the door open to the possibility of helping pay her debt, which includes more than $10 million in unpaid bills to vendors and consultants -- including strategist Mark Penn, who remains a flash point of criticism for backing a trade deal she opposed.

`On the Team'

In the interest of unifying the party, Obama will seek ``a broad-ranging discussion with Senator Clinton about how I could make her feel good about the process and have her on the team,'' he told reporters in Oregon on May 9.

Clinton spokesman Howard Wolfson said ``there have been no discussions along those lines'' and ``no contemplation of it.''

In the past, victorious candidates have helped their vanquished opponents pay off campaign debts. Supporters of Clinton, 60, aided former Iowa Governor Tom Vilsack after he dropped out of the race last year. And McCain's backers gave to Kansas Senator Sam Brownback, a failed Republican contender.

There is one sleight-of-hand -- though legal -- tactic Clinton could use to pay off debts to others, though not to herself.

Through March 31, she had collected $23 million in donations designated for the general election.

Redirect Contributions

She could ask those donors to redirect the contributions toward her 2012 Senate re-election campaign rather than the 2008 presidential race, said Kenneth Gross, a former Federal Election Commission lawyer now at Skadden, Arps, Slate, Meagher & Flom LLP. The Senate campaign could then pay off the current debt to vendors and consultants, including Penn, to whom she owed $4.5 million through March 31.

In the past, such donations could have also gone to pay back a candidate's personal loans. The 2002 law, which banned corporate, union and unlimited individual contributions to campaigns, put a stop to that. It limited such repayments to $250,000.

``She has between now and the convention to raise money to retire the loan or else she will have made an $11 million contribution to her campaign,'' former Federal Election Commission Chairman Michael Toner said.

Federal election law prohibits Obama from directly aiding Clinton through his campaign war chest; nothing stops him from asking his donors to do so.

Obama Donors

Yet while Obama has mostly relied on smaller contributors to fuel his record-setting fundraising, he's unlikely to ask them to shell out any money for Clinton, who together with her husband earned $109 million from 2000 through 2007. And many of those donors are unlikely to be willing to help her after this hard-fought campaign.

Democratic consultant Peter Fenn, who is neutral in the race, said Obama will need to call upon those donors for the general election should he decide not to take public funding for the campaign, or to give to the Democratic Party if he does.

``They're very loyal Obama people,'' Fenn said. ``You're not going to raise that much money from those people for Hillary.''

More probable sources of financial help for Clinton would be those who have given the maximum $2,300 to Obama's campaign, said Democratic consultant Erik Smith.

``Few campaigns would mobilize their grassroots supporters for something like this, and Obama certainly wouldn't,'' said Smith, an adviser to Richard Gephardt's 2004 presidential race. ``The most likely scenario would be that some of Obama's largest donors would work discreetly and independently of the campaign to raise money.''

To contact the reporters on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net; Timothy J. Burger in Washington at Tburger2@bloomberg.net.