A little-known campaign loophole allows members of Congress to make high-interest personal loans to their own campaigns and then never pay them off–a scheme that generates passive streams of profit worth hundreds of thousands of dollars.
The startling revelation comes from Government Accountability Institute President Peter Schweizer’s new book, Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets.
Last week, CBS 60 Minutes veteran reporter Steve Kroft and Peter Schweizer exposed how Rep. Grace Napolitano (D-CA) managed to bag nearly $300,000 for herself from high-interest loans to her own campaign using the donation extraction technique.
Napolitano is not the only member of Congress currently engaged in the campaign loan money-making scheme; 14 other lawmakers are bagging profits as well, reports Schweizer.
Rep. Colleen Hanabusa (D-HI), who sits on the powerful House Armed Services Committee, scored $31,000 in interest checks from the 2008 and 2010 election cycles off of her personal campaign loan of $125,000.
Rep. Paul Broun (R-GA) has also poached a handsome profit using the secret high-interest self-loan scheme. After telling the Federal Election Commission (FEC) that he would not charge his campaign any interest at all, Broun loaned his campaign $309,000 and walked home with almost $29,000 in interest payment profits, reports Schweizer in his book.
Extortion upends conventional assumptions about outside special interests bribing Washington insiders. The problem, argues Schweizer, is exactly the reverse.
“What if the problem is not bribery… but extortion?” asks Schweizer. “What if the Permanent Political Class in Washington, made up of individuals from both political parties, is using its coercive public power to not only stay in office but to threaten others and to extract wealth, and in the bargain pick up private benefits for themselves, their friends, and their families?”
Schweizer, whom Newsweek dubbed “The Wonk Who Slays Washington,” is one of Washington’s most respected, if feared, authors. His last New York Times bestselling book, Throw Them All Out, sparked a 60 Minutes report detailing Schweizer’s revelations of insider trading by members of Congress. Congress then overwhelmingly passed and President Barack Obama signed the Stop Trading On Congressional Knowledge (STOCK) Act to ban congressional insider trading. As Slate noted, Schweizer authored “the book that started the STOCK Act stampede.”
Schweizer says he hopes his newest book, which contains 35 pages of source materials and over 600 endnotes, sparks citizen engagement.
“Today lawmaking has morphed into moneymaking,” said Schweizer.
He added: “So-called ‘public service’ has now become a ruse where politicians use obscure rules, complex bills, and political extortion to create personal profit centers for themselves, their cronies, and their family members. That was never the Founding Fathers’ intent.”