On the February 20 edition of CNN's The Situation Room, CNN congressional correspondent Dana Bash reported that "[Sen.] John McCain launched his most direct assault yet at Democrat Barack Obama, accusing the candidate, running as a reformer, of reneging on a pledge," which Bash described as “whether Obama would agree to limit campaign spending by accepting public funding for the general election,” should Obama become the Democratic presidential nominee. Bash stated that McCain “turned his scathing criticism ... to the issue of character” and “is pointing to this survey from a watchdog group he and Obama both filled out this fall” in which “both said yes, they'd accept public financing.” Bash then aired a clip of McCain asserting: “Senator Obama did make that commitment in writing. I expect him to -- I think the American people would expect him to hold to that commitment, especially if we want to bring about change.” However, Bash made no mention of a loan agreement that McCain signed in November 2007. Under the loan agreement and its amendment, McCain could have been required under certain circumstances to remain an active candidate and apply for federal matching funds in order to repay the loan. In other words, Bash reported McCain's “scathing criticism” of Obama over the public funding issue, but not that McCain had entered into a loan contract in which he was agreeing to remain a candidate under certain circumstances, even if he had no chance of winning, to qualify for public money to pay back the loan.

The Washington Post reported on the loan on February 16, noting that McCain's campaign signed an amended agreement in December to borrow another $1 million above the $3 million provided by the previous agreement. According to the Post:

McCain's campaign filed the modification to his initial $3 million loan on Dec. 17, seeking an additional $1 million. The bank asked him to produce something more than his campaign's assets as collateral.

“They said, 'You've explained how you can afford to borrow more, and how you can pay us back if things go well. What happens if things go badly?' ” said Trevor Potter, a McCain attorney.

The campaign's response, Potter said, was that McCain could reapply in the future for federal matching funds, and would agree to use the FEC certifications for those funds as collateral.

Under the agreement, McCain promised that if his campaign began to falter, he would commit to keeping his campaign alive and to entering the federal financing system so the money he had raised could be used to gain an infusion of matching funds. Had that happened, he would have been forced to abide by strict federal spending caps before the Republican National Convention in September.

Under FEC rules, a candidate who uses a certification for federal funds as collateral for a loan is obligated to remain within the public financing system. “We very carefully did not do that,” Potter said.

On December 20, the FEC announced that McCain had applied for and received certificates for more than $5.8 million in federal matching funds. However, as the Post article noted: “McCain's victories in the early primaries meant he never had to enter the public financing system. He formally returned his certification to the FEC on Feb. 6.” On February 21, the Associated Press reported: “The government's top campaign finance regulator says John McCain can't drop out of the primary election's public financing system until he answers questions about a loan he obtained to kickstart his once faltering presidential campaign. Federal Election Commission Chairman David Mason, in a letter to McCain this week, said the all-but-certain Republican nominee needs to assure the commission that he did not use the promise of public money to help secure a $4 million line of credit he obtained in November."

From the John McCain 2008, Inc. Business Loan Agreement:

Additional Requirement. Borrower and Lender agree that if Borrower withdraws from the public matching fund program by the end of December 2007, but John McCain then does not win the New Hampshire primary or place at least within 10 percentage points of the winner of the New Hampshire Primary, Borrower will cause John McCain to remain an active political candidate and Borrower will, within thirty (30) days of the New Hampshire Primary (i) reapply for public matching funds, (ii) grant to Lender, as additional collateral for the loan, a first priority perfected security interest in and to all of Borrower's right, title and interest in and to the public matching fund program, and (iii) execute and deliver to Lender such documents, instruments and agreements as Lender may require with respect to the foregoing.

[...]

COMPLIANCE WITH THE FEDERAL ELECTION COMMISSION'S MATCHING FUNDS PROGRAM. Borrower agrees and covenants with Lender that while this Agreement is in effect, Borrower shall not exceed overall or state spending limits set forth in the Federal Matching Funds Program, if applicable.

[...]

STATUS OF CURRENTLY HELD CERTIFICATIONS OF MATCHING FUNDS. Borrower and Lender agree that any certifications of matching fund eligibility currently possessed by Borrower or obtained before January 1, 2008 and the right of John McCain 2008, Inc. and John McCain to receive payment under these certifications are not collateral under the Commercial Security Agreement for this Loan.

On December 17, 2007, the loan was modified as follows:

1. Without limiting anything set forth in this Modification to the contrary, certain provisions of the Loan Agreement are hereby modified as follows:

(a) The paragraph entitled “Additional Requirement” set forth in the Affirmative Covenants section of the Loan Agreement is hereby deleted in its entirety and the following substituted in lieu thereof:

"Additional Requirement. Borrower and Lender agree that if Borrower withdraws from the public matching funds program but John McCain then does not win the next primary or caucus in which he is active (which can be any primary or caucus held the same day) or does not place at least within 10 percentage points of the winner of that primary or caucus, Borrower will cause John McCain to remain an active political candidate and Borrower will, within thirty (30) days of said primary or caucus (i) reapply for public matching funds, (ii) grant to Lender, as additional collateral for the Loan, a first priority perfected security interest in and to all of Borrower's right, title and interest in and to the public matching funds program, and (iii) execute and deliver to Lender such documents, instruments and agreements as Lender may require with respect to the foregoing. Borrower and Lender agree that Borrower will provide oral or written notice to Lender at least 24 hours before notice of withdrawal from the public matching funds program is provided by Borrower or John McCain to the Federal Election Commission."

(b) The paragraph entitled “COMPLIANCE WITH THE FEDERAL ELECTION COMMISSION'S MATCHING FUNDS PROGRAM” set forth in the Loan Agreement is hereby deleted in its entirety and the following substituted in lieu thereof:

"COMPLIANCE WITH THE FEDERAL ELECTION COMMISSION'S MATCHING FUNDS PROGRAM. Borrower agrees and covenants with Lender that while this Agreement is in effect Borrower shall not without Lender's prior written consent, exceed overall or state spending limits imposed under the Federal Matching Funds Program, irrespective of whether Borrower is subject to such program as of any applicable date of determination."

(c) The paragraph entitled “STATUS OF CURRENTLY HELD CERTIFICATIONS OF MATCHING FUNDS” set forth in the Loan Agreement is hereby deleted in its entirety and the following substituted in lieu thereof:

"STATUS OF CURRENTLY HELD CERTIFICATIONS OF MATCHING FUNDS. Borrower and Lender agree that any certifications of matching funds eligibility now held by Borrower, and the right of the Borrower and/or John McCain to receive payment under such certifications, are not (and shall not be) collateral for the Loan." [emphases in original]

[...]

(f) The paragraph entitled “Collateral Description” set forth in the Security Agreement is hereby deleted in its entirety and the following substituted in lieu thereof:

“COLLATERAL DESCRIPTION. The word ”Collateral" as used in this Agreement means the following described property, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located, in which Grantor is giving to Lender a security interest for the payment of the Indebtedness and performance of all other obligations under the Note and this Agreement:

[...]

Grantor and Lender agree that any certifications of matching funds eligibility, including related rights, now held by Grantor are not themselves being pledged as security for the Indebtedness and are not themselves collateral for the Indebtedness or subject to this Security Agreement. Grantor agrees not to sell, transfer, convey, pledge, hypothecate or otherwise transfer to any person or entity any of its present or future right, title and interest in and to the public matching funds program or any certifications of matching funds eligibility, including related rights, issued with respect thereto without the prior written consent of Lender."

From the February 20 edition of CNN's The Situation Room:

BLITZER: What's next for McCain appears to include some stepped-up attacks on the person who could be his Democratic rival: Senator Barack Obama. Let's go to CNN's Dana Bash. She's watching all of this in Columbus, Ohio. Ohio, one of those March 4 battlegrounds as well. McCain says Obama should keep his word on a key issue. Explain to our viewers what's going on, Dana.

BASH: Well, you remember last night, Wolf, Senator McCain in his victory speech here in Columbus really went after Barack Obama on the issue of his experience -- or inexperience, from McCain's perspective -- especially on the issue of national security. Well, today, McCain turned his scathing criticism from that issue to the issue of character.

[begin video clip]

BASH: With his GOP primary battle all but behind him, John McCain launched his most direct assault yet at Democrat Barack Obama, accusing the candidate, running as a reformer, of reneging on a pledge.

McCAIN: We either keep our word or we don't keep our word. I intend to keep my word to the American people.

BASH: At issue, whether Obama would agree to limit campaign spending by accepting public funding for the general election. In an op-ed in Wednesday's USA Today, Obama proposed the Democrat and Republican nominee make a, quote, “meaningful agreement in good faith that results in real spending limits.”

McCAIN: And that's Washington doublespeak. I committed to public financing. He committed to public financing. It is not any more complicated than that.

BASH: McCain is pointing to this survey from a watchdog group he and Obama both filled out this fall, and both said yes, they'd accept public financing.

McCAIN: Senator Obama did make that commitment in writing. I expect him to -- I think the American people would expect him to hold to that commitment, especially if we want to bring about change.

BASH: With that, the probable GOP nominee is trying to undermine Obama's character, the heart of the Democrat's “I'm an agent of change” candidacy.

But McCain is also going after Obama on public financing for a more practical reason. Without spending limits, McCain advisers know they'd likely be at a huge financial disadvantage. Look at the history. Last year, Obama raised a little more than $102 million. McCain raised less than half, about $41 million. Since McCain's political fortunes turned around, so has his ability to bring in campaign cash -- but nothing like the tens of millions flowing into Obama's coffers.

[end video clip]

BASH: And an Obama spokesman responded to McCain by accusing him of abandoning efforts, new efforts, to reform the campaign-finance system. That, of course, had been McCain's signature issue, but it is wildly unpopular with the Republican base. Wolf.