Fund-Raiser Does Big Favor for Clintons : Finance: Terry McAuliffe will help first couple buy N.Y. home by guaranteeing $1.35-million mortgage. Some question the propriety of the deal.
After President Clinton and Democratic fund-raiser Terry McAuliffe played a round of golf in upstate New York on Tuesday, the president made an unscheduled visit to St. Camillus Nursing Home to visit McAuliffe’s ailing 79-year-old mother, Millie, who recently had hip replacement surgery.
Later in the week, McAuliffe returned the favor--and then some. When former White House Chief of Staff Erskine Bowles at the last minute balked at guaranteeing a $1.35-million mortgage for the Clintons’ new house in Chappaqua, N.Y., McAuliffe rode to the president’s rescue.
In a move that enables the Clintons to buy the house--and Hillary Rodham Clinton to have a base for her New York Senate run--the 42-year-old real estate developer and deal-maker pledged to put up $1.35 million cash to secure a mortgage for the Clintons. Otherwise, swamped by more than $5 million in legal debts, the Clintons might have had difficulty obtaining the loan for the five-bedroom century-old house.
Ethics law experts said Friday that there is no legal difficulty with the Clintons’ accepting McAuliffe’s help, but some questioned the propriety of the president’s accepting such a benefit from a private citizen.
“It’s just plain wrong. It’s dangerous. It’s inappropriate,” said Fred Wertheimer of Democracy 21. “This is a financial favor worth over a million dollars to the president.”
McAuliffe is not actually giving any money to the Clintons. Rather, he will deposit $1.35 million--the full amount of their mortgage--with Bankers Trust for the five-year term; the only risk to McAuliffe’s money is in the unlikely event that the Clintons default. The Clintons will put up $350,000 and pay an adjustable-rate mortgage set at one point over the London Interbank Offered Rate, or Libor, now at 5.52%.
Some mortgage bankers said that McAuliffe’s intervention either allowed the Clintons to obtain what might appear an otherwise risky loan or to secure a lower interest rate because the mortgage is fully backed by collateral. “They would definitely be in a better position to get a better rate with that deal,” said Crestar Mortgage Co. Senior Vice President Patrick Casey.
White House spokesman Jim Kennedy said the arrangement was “deemed to be the most sensible mortgage, given their situation.”
Neither Bankers Trust nor the White House would provide details about what interest McAuliffe would earn. Financial experts said it was likely to be well below what he could reap in the stock market or from his investments but that there would be little inconvenience for McAuliffe if he keeps a significant amount of his wealth in cash.
A source close to McAuliffe described the transaction as “risk free.” McAuliffe’s business has included such enterprises as developing real estate in Florida, selling title insurance, marketing credit cards to unions and running a bank.
“It’s not a legal issue, it’s a perception issue,” said Charles R. Lewis of the Center for Public Integrity. “I am always uncomfortable when people who give money or raise money are personally involved with a public official financially. . . . It’s worrisome for a sitting president to be this dependent on any one person financially.”
The White House said it was going beyond legal requirements in revealing McAuliffe’s role, noting that the Office of Government Ethics had advised it that McAuliffe’s guarantee of the loan was not a “gift” that must be reported on the Clinton’s annual financial disclosure form. The ethics office reasoned that, because the guarantee is only a promise for the future, it does not have current cash benefit that has to be included on the forms, a government official said.
“Even though we have no obligation to do so, we decided to make public the details about the mortgage in an effort to be as transparent as we can,” Kennedy said.
