Congresswoman Grace Napolitano of Torrance, 72, has been elected to Congress 6 times in a safe Democratic seat in California.
She loaned her initial campaign $150,000. Such loans are common in politics. Senator Clinton, for example, advanced her presidential campaign about $13 million last year. Instead of earning interest on it, she had to write it off. Losing candidates have difficulty raising funds to pay off campaign debts.
The Representative though charged her campaign an interest rate of 18% on the loan. The usually ineffectual Federal Election Commission accepted her argument that the money came from a retirement account that would incur an early withdrawal penalty. She graciously lowered the interest rate to 10% in mid-2006.
The FEC allows candidates to charge their campaigns a “commercially reasonable” interest rate on moneys they loan the campaign. Forget 5-6%; now we know it can be a credit card rate.
So far, she has earned over $158,000 in interest on the loan since 2001 and $221,780 since 1998. Not a bad return on investment, and what a nice supplement to her Congressional income. 18% is the interest rate which many claim is outrageous on credit cards. The current Fed Funds rate is 0%.
Why hire family members, or pay rent to family (Pelosi), when you can pay yourself?
Since she represents a safe district, she could easily have raised funds to pay off the loan, but to do so would have resulted in a substantial loss of income.
She held fundraisers in 2007 and 2008 to retire the debt, but only reduced it by $65,000. She obviously wasn’t trying hard.
The rules which allowed politicians to convert campaign funds to personal uses were abrogated years ago. Congresswoman Napolitano has pioneered an ingenious, but simple way, to do so. Who needs the discredited House Bank when you can be your own banker?