Lt. Gov. Says He’ll Repay Loan With Own Money
Lt. Gov. Leo T. McCarthy said this week that he will use personal funds to repay $125,000 of a loan one of his campaign committees received from a Los Angeles savings and loan that since has been seized by state regulators.
The San Francisco Democrat’s political committee, McCarthy for U.S. Senator, took out a $300,000 loan from First Network Savings Bank in the waning days of his failed 1988 Senate campaign. The committee repaid $175,000 of the loan and made $46,000 in interest payments, but still owed $125,000 that was due Monday.
The loan was secured by two lists of campaign contributors and McCarthy’s personal guarantee, according to the loan documents and McCarthy’s campaign manager, Roy Behr.
The loan was originally due on April 27, 1989, but McCarthy was given a one-year extension. Just before the loan became delinquent on Monday, McCarthy requested a further delay.
“I have not yet received an answer from the bank, but I have decided to repay the remaining amount myself,” McCarthy said in a statement issued by his campaign. “I expect to make the complete payment this week.”
McCarthy said his personal guarantee, backed by $1.2 million in assets, meant that “neither the bank’s shareholders nor the taxpayers were ever at risk of losing a penny.”
Behr said McCarthy would either obtain a personal loan from another bank or sell some property to raise the money he needs to repay the debt. The lieutenant governor may loan the needed money to his campaign, which would repay the bank and then be able to repay McCarthy by raising money from private contributors.
The thrift was seized by state regulators in January and is under the control of the federal Resolution Trust Corp. Bailing out the failed thrift is expected to cost the taxpayers $100 million, according to a report in the San Francisco Chronicle.
State Sen. Marian Bergeson (R-Newport Beach), who is running in the Republican primary for the right to face McCarthy in the fall, said First Network’s collapse was caused “in part by political loans given to well-connected politicians.” Bergeson noted that the bank’s former chairman, Carl M. Rheuban, contributed $50,000 to a voter registration drive headed by U.S. Sen. Alan Cranston (D-Calif.), whose political future has been endangered by his involvement in the nationwide savings and loan debacle.