When political candidates find themselves in hot water, they occasionally retreat to bunker mode, declining to talk about the controversy any further and wagering that silence will ultimately make the story run its course sooner. That, of course, provides a big opening to opponents to hammer away with questions about the politician’s conduct and character.
But having questions is not the same thing as having answers. And that distinction is highlighted by a pair of ads from Linda McMahon’s Senate campaign that focus on a home-equity line of credit her challenger Chris Murphy received 16 months after being sued for missing payments on his mortgage. One of the ads fairly raises questions about the circumstances of the home loan, while the other makes factual assertions of wrongdoing that the McMahon campaign cannot at this point support.
Since revelations that Chase Home Finance had filed suit against Murphy in March 2007 – two years after he was sued for falling behind on rent – the McMahon campaign has pounced with a series of ads highlighting the missed payments along with Murphy’s receipt of a 4.99-percent home loan in July 2008 from Webster Bank. Webster is headquartered in Waterbury – within the Fifth District that Murphy currently represents in Congresss – and received $400 million in federal loans under the TARP bank-bailout legislation, which Murphy, a member of the House Committee on Financial Services, supported.
McMahon’s campaign manager described the 2008 loan as a “sweetheart” deal from Webster Bank, and a recent radio ad picks up on that theme. After noting Murphy’s payment record, the announcer states: “But somehow despite his bad credit rating, after Murphy was elected to Congress, he got a special, below-market loan that ordinary people couldn’t get.”
Those are specific, and undeniably harsh, allegations. But the McMahon campaign’s support for the claims is based on circumstantial and in some cases cherry-picked evidence. A campaign spokesman deemed it “highly unlikely” that someone with Murphy’s credit history would have qualified for 4.99 percent loan without special intervention by the bank – intervention an ordinary customer would not receive. The campaign also produced literature from 2008 suggesting some banks were offering considerably higher rates for home-equity lines.
But none of that provides sufficient evidence to declare as a matter of fact that Murphy “got a special below-market loan that ordinary people couldn’t get.”
We don’t know everything about Murphy’s home-equity line of credit – in substantial part because he won’t authorize the release of more information about it – but here’s what we do know about Webster’s underwriting in the summer of 2008. Data provided by the bank show that Webster’s best offered rate for a line of credit in the amount Murphy was seeking – $43,000 – was 4.49 percent. But to get that rate, applicants had to meet two requirements.
First: the total amount of loans secured by the house could not exceed 80 percent of the home’s appraised value. Webster officials say Murphy’s loan met that requirement. It’s difficult to know for sure without access to the original appraisal, but based on Murphy’s original first mortgage, the house would have had to be valued at perhaps between $265,000 and $270,000 in the summer of 2008 in order to meet that requirement. In October 2008, the town of Cheshire pegged the market value of the house at $244,414. Although home prices were falling in late 2008, that’s a sizable spread. But with the available evidence, it remains impossible to confirm or refute the bank’s statement that the loan application met the 80-percent loan-to-value requirement.
The second condition for getting the bank’s best 4.49 percent rate was an applicant with a top credit score. It appears undisputed that Murphy’s credit rating would have taken a hit, but he wasn’t applying for the loan on his own. Murphy had gotten married by 2008 and his wife joined him as a co-applicant on the loan. A Webster official said that in the summer of 2008 it was the bank’s policy – since revised following the mortgage meltdown – to consider only the better of the two credit scores when qualifying a loan application for a married couple.
Officials with Webster and the McMahon campaign disagree on how common that practice was four years ago, but Webster did release a portion of its retail equity underwriting policy, dated June 1, 2008, which states: “Credit Score – Use the highest Transunion score regardless of the number of applicants,” with the emphasis in the original. That’s reasonable evidence that that is the policy under which the Murphys’ loan would have been evaluated.
A Webster spokesman said Murphy’s wife had good credit, but said the bank is barred from revealing her exact score, and Murphy has declined to say.
In the end, the Murphys did not qualify for the best rate of 4.49 percent and received a loan half a point higher, at 4.99 percent. Data released by Webster indicates that among home equity loans disbursed in the summer of 2008 to applicants with loan profiles similar to the Murphys, the interest rate ranged from 4.74 percent to 5.24 percent. Among all home equity loans written in that time period, regardless of credit rating and loan-to-value ratios, the bank says rates ranged from 3.49 percent to 6.99 percent
A McMahon spokesman did not challenge the authenticity of those statistics, but also noted that Webster Bank is not an impartial player in the loan saga. In addition, the campaign cited a magazine article from March 2008 that stated 7.74 percent was the average national rate for home equity lines of credit, and pointed to a flyer from the Farmers Insurance Group Federal Credit Union dated July 2008 offering home equity lines of credit for no less than 6.43 percent.
But those aren’t the only comparisons the campaign could have relied on. In that same July 2008, a flyer from the Members Exchange Credit Union advertises home equity lines as low as 4.5 percent, and the Scott Credit Union was offering loans as low as 4.0 percent.
More importantly, perhaps, there is no significant dispute that Webster was offering the rates it claims it was offering in the summer of 2008. The issue is whether the bank ignored its typical underwriting policies to give Murphy a deal he didn’t deserve.
While that question remains, the McMahon camp to date has not provided evidence establishing that that’s what happened or refuting the bank’s claim that the loan was handled properly.
“You’re asking me to provide evidence,” a campaign spokesman said. “The problem is, we don’t have the evidence; Chris Murphy has it.”
And therein lies the problem with the radio ad. Raising questions about Murphy’s dealing with Webster Bank is fair game. But this ad goes far beyond that to assert as fact that Murphy’s loan was singled out for preferential treatment.
Not all accusations are created equal, and there are bald assertions campaigns can make without running afoul of fact-checking. Saying a politician is a “lapdog for the administration” or “in the pocket of big business” would be within the bounds of aggressive campaigning.
But this assertion is not in that category. Stating that Murphy accepted a special loan not available to ordinary people is accusing him at a minimum of violating Congressional ethics rules, if not committing a federal crime. And that requires more evidence than is available here.
While it may be frustrating for the McMahon campaign to lack the full details of Murphy’s loan arrangement – as it may be frustrating for all wishing to get to the bottom of what went on – his silence does not equate to verification of their worst-case scenario.
Without clearer evidence that Murphy accepted a financial deal he did not deserve, we rate McMahon’s radio ad “Significantly Misleading” in presenting so serious an accusation as a statement of fact without, at least for now, the factual basis to back it up.
As noted, that does not mean the Murphy loan can never fairly be a campaign issue, and in a more-recent television ad, the McMahon campaign hits many of its key points while being far more careful in how it presents the information.
The ad invites viewers to “connect the dots” between various elements of a timeline from the 2003 lawsuit for failing to pay rent to Webster Bank receiving bailout money in the fall of 2008. “Despite skipping payments and two lawsuits, then-Congressman Murphy gets a new loan at a great rate,” the narrator explains as various dates move across the screen.
Calling it a “great” rate is naturally subjective, but certainly not an objectionable description.
The ad then tiptoes a bit around how Murphy scored that great rate.
“How?” the narrator asks? The bank that gave Murphy the loan was also giving him campaign contributions, because Murphy sat on the banking committee. Murphy voted for the bank bailout, and Murphy’s favorite bank got a $400 million bailout. Connect the dots.”
Webster Bank’s Political Action Committee did give $1,350 to Murphy during the 2008 election cycle. While the PAC made donations to just two candidates that cycle – Murphy and fellow Connecticut Congressman John Larson – it’s not unreasonable to surmise that Murphy’s seat on the banking committee increased his appeal among bankers.
And the rest of the assertions – ignoring whether Webster is really Murphy’s “favorite” bank – are factually accurate: Murphy voted for the bailout, and Webster was among the banks that received money under the program.
Asking the question “How?” before describing Murphy’s political relationship with Webster certainly indicates that the McMahon camp has connected the dots in a manner unflattering to Murphy. But the tenor of the ad makes it clear the campaign is laying out what it considers to be a plausible scenario and encouraging viewers to adopt that same view of events.
Supporters of Murphy are naturally free to reject the ad’s premise. But unlike the radio ad, the “Dots” ad is not saddled with specific accusations unsupported by evidence. On the whole, it is an ad that raises fair questions and suggests an answer, without declaring that the campaign knows something with certainty that it doesn’t know.
A press release accompanying the television does in fact repeat some of the unsubstantiated claims the McMahon campaign has made. But it is only the specific wording of the commercial that is at issue here. And without the flaws inherent in the radio spot, the “Dots” television ad earns a rating of “Generally Accurate.”
Click the radio image below to listen to Linda McMahon’s radio ad titled “Rough Few Weeks,” and click the YouTube frame to watch the television ad titled “Dots.” Click here for more Claim Check columns, and here for information on how we analyze political ads.