Here’s a new, foolproof way for an elected official to make some money on the side: loan money to your campaign, charge it a lot of interest, and then pay the loan principal off slowly, over a number of years.

According to an article in yesterday’s Bloomberg.com [1], this is what Rep. Grace Napolitano of southern California did back in 1998. And it’s still paying off very nicely, thank you, with $68,000 in interest in the first five months of 2008 alone.

How does she get anyone to give her money to pay herself all that interest? Ah, there’s the rub. She seems to get most of the money from the PACs of utility companies, construction companies, industry and professional associations and, of course, Fannie Mae, which is sadly no longer the cash cow for politicians it once was.

In other words, the only way an elected official can play this little game is by accepting money from people who care little about her candidacy and a lot about pleasing her personally. This is self-dealing that leads to deal after deal, the conflict of interest that keeps conflicting.

Robert Wechsler
Director of Research, City Ethics

203-230-2548