Ted Cruz’s Campaign Loan: Smoking Gun or Big Yawn?

By John Zmirak Published on January 14, 2016

News organizations and rival campaigns are making much of the recent revelation that Ted Cruz’s wife Heidi borrowed money from her employer against the value of their combined brokerage account — in other words, their own assets. As the New York Times reports:

In the first half of 2012, Ted and Heidi Cruz obtained the low-interest loan from Goldman Sachs, as well as another one from Citibank. The loans totaled as much as $750,000 and eventually increased to a maximum of $1 million before being paid down later that year. There is no explanation of their purpose.

Neither loan appears in reports the Ted Cruz for Senate Committee filed with the Federal Election Commission, in which candidates are required to disclose the source of money they borrow to finance their campaigns.

The loan was not a sweetheart deal, but at a standard rate of interest and well collateralized: The Cruzes had accumulated more than enough equity to cover the loan’s full value. It’s apparently standard practice for her employer to allow such loans, so we see here no evidence of influence-peddling — which would seem unlikely, anyway, given that Cruz was at the time a distant long-shot to beat David Dewhurst, Rick Perry’s lieutenant governor, who could draw on a vast personal fortune. Betting that Cruz would win, and do favors for the bank, would have been an even worse wager than most subprime mortgage bonds.

So why could the revelation of this loan be a problem for Cruz’s campaign? It’s not because Cruz failed to disclose it, and thereby violated a recondite campaign finance rule. Republican primary voters are probably the last people on earth who’d care about the “sanctity” of FEC rules. Indeed, the whole “campaign finance reform” movement is identified with the Republican senator conservatives most despise, John McCain, and is widely seen as a ploy by liberals and “establishment” Republicans to keep out “insurgent” candidates such as … Ted Cruz.

No, none of that spaghetti seems likely to stick to the wall. But there’s a meatball in the mess, whose slow slide down the wallpaper seems likely to leave a stain, at least among some of the hard-core conservatives Cruz is trying to peel away from Trump. It’s the identity of Heidi Cruz’s employer, the Wall Street megabank Goldman Sachs.

As Jennifer Rubin suggests in The Washington Post, Cruz probably wished to avoid highlighting his family connection to this bank during a contentious Republican primary, where he was running as the true, outside conservative and depicting his opponent as part of the broken, insider “establishment.” Because you don’t get more “insider” than Goldman Sachs — the one bank which Pat Buchanan used to call out by name as an epitome of what is wrong with Washington. No, Buchanan wasn’t being anti-Semitic, as some suggested at the time, but instead pointing to the very real fact that Goldman wields disproportionate influence in Washington, and profits from it.

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Goldman certainly fared better than less well-connected banks (such as Lehman Brothers) during the 2008 collapse and government bailout. Free market defenders frequently cite Goldman as “Exhibit A” when explaining what they mean by “crony capitalism,” and their anger is palpable — the kind of anger that Cruz himself has made a fine career of channeling. Read what the editor of Againstcronycapitalism.org has to say about Goldman:

I will note this again because it should be noted again and again. Goldman Sachs should be dead. Door nail. Kaput. Finito. Gone. A piece of history. Expired.

But Goldman Sachs, Government Sachs, lives because it got bailed out by you the taxpayer. You’re the one who felt the brunt of the Great Recession. You who lost your home. You who moved in with the kids to make ends meet. You who went on food stamps quietly in desperation. You who had the heat turned off. You who saw the middle class slip away, away, away. You kept Goldman alive, largely because their former CEO Hank Paulson ran the US Treasury when Wall Street teetered on the open pits of hell.

That sounds like a speech that Ted Cruz might have made. But of course, he couldn’t, given the role that Goldman played in his rise to power.

Or could he? According to Bloomberg Politics (H/T Politico), Cruz was forthright in criticizing Goldman’s undue influence, albeit in more measured tones:

Cruz was asked by host Mark Halperin whether, on balance, Goldman Sachs was a positive or a negative force on society.

“Like any institution, there’s some of both,” Cruz responded, adding, “Goldman is one of the biggest banks on Wall Street, and my criticism with Washington is they engage in crony capitalism. They give favors to Wall Street and big business and that’s why I’ve been an outspoken opponent of crony capitalism, taking on leaders in both parties. I think big business, if they’re building a better mousetrap, great, but it shouldn’t be government favoring, and let me give you an example: Dodd-Frank. Sold to the American people as stopping ‘too-big-to-fail.’ What happened? The big banks have gotten bigger. Goldman has gotten bigger….

“Because, like many other players on Wall Street and big business, they seek out and get special favors from government,” Cruz responded. “I think they’re entitled to practice their business, but without subsidies or special benefits.”

So Cruz is unafraid to bite the hand that fed him, because he knows that its vast influence is in conflict with economic freedom and other conservative principles. His wife is on leave from Goldman Sachs for the duration, and he paid back the loan with interest. Will his connection with this big, well-connected bank harm him among conservatives? Probably only among those who believe in deep conspiracy theories, but Trump supporters should know that the real estate developer from New York has a much longer list of dubious former allies to explain, including the Rev. Al Sharpton. If Trump makes Goldman a talking point, expect Cruz supporters to tie Rev. Sharpton’s signature bling medallion like an anchor around Trump’s neck.

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