“Draining the swamp” can be interpreted in a number of ways, but in Washington D.C., it’s taken to mean limiting the influence of money on politicians, a crusade many feel is either doomed from the start or just merely a talking point.
At any rate, the swamp seems to be thriving: tax cuts for the rich, free flights on contributor’s private airplanes, sweetheart contracts to friends of cabinet secretaries.….the list could go on, but you get the picture. A recent storyrevealed a swampy practice involving House and Senate members – private personal loans.
Campaign law limits how much an individual can give to a political candidate each year to $2,700. There’s no limit on donations to political action committees, but it’s hard for politicians to directly access these funds. On the other hand, a person loan to a representative or senator can go directly into the politician’s (or spouse’s) bank account. The loan must be disclosed to varying extents, but the influence it buys is a matter of conjecture.
At least 19 Senate and House members or their spouses are currently in receipt of private loans from individuals or organizations, some dating back more than 20 years. The size of the loans range from $15,000 to $5 million. This begs the question as to what the lenders are getting for their money besides interest. In fact, the House disclosure rules don’t reveal the loans’ interest rates or due dates, so we don’t know whether our representatives are receiving below-market-rate loans. The Senate does reveal the loan terms, to its credit.
There is no evidence of actual quid pro quo of personal loans for specific legislative action. On the other hand, it’s naïve to think that these loans never create potential conflicts of interest. It certainly displays a vested interest on the part of the lender to the lawmaker.
Members of both parties have these loans, 13 Republicans and 6 Democrats.
California representative David Valadao is vice-chairman of the Subcommittee on Agriculture. Valadao, who owns a dairy farm, has received more than $1 million in personal loans from his neighbor, contributor and fellow farmer, Delbert Ray Ellis. Valadao strongly advocates cutting farming regulations. Watchdogs are concerned about the possibility of Valdao taking actions that benefit Ellis while owing Ellis more than $1 million.
In 2011, Texas representative Henry Cuellar took a property loan of up to $100,000 from a constituent and contributor, Rasoul Khaledi, who runs almost a dozen duty-free stores along the Mexican border and in Laredo. Khaledi and his relatives have contributed $31,000 to Cuellar’s campaign committee, and four of Khaledi’s children served as unpaid interns for Cuellar. Representative Cuellar actively promotes free trade issues that may happen to benefit Mr. Khaledi. The terms of Khaledi’s loan to Cuellar are unknown.
Private loans are very different from bank loans. Banks will go to court if you miss payments. Private lenders can be very forgiving, and they might charge interest rates well below those of banks. In other words, members of Congress who get these loans just might be influenced to take positions favored by the lender, especially if the lender doesn’t collect much interest or enforce a due date.
When it comes to taking out a loan, it’s good to be a representative or senator, especially if you have friends who are willing to lend money on favorable terms. The rest of us who need a private loan would have to look elsewhere for other opportunities, like online personal loans. These loans are not collateralized, and the interest rates on these loans range from 2.5 percent to 36 percent or more, depending on your creditworthiness. It’s may be a safe bet than none of 19 legislators with personal loans pay anything like 36 percent.
Author: Andrew Rombach
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