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June 08, 2005

Political Capital Spent, President Bush Applies for Interest-Only Loan

Sign_thumbJust six months after declaring that he intended to spend his 'political capital,' President Bush appears to have done just that. With that capital now spent, the President is following the lead of millions of Americans and applying for a risky new lending tool known as an interest-only loan. The loan will give Mr. Bush the cash he needs to cover expenses—including this summer's blockbuster 'Social Security on the Verge of Collapse-a-pa-looza' tour—while allowing him to make payments solely on the interest of the loan.

President Bush won over by low-monthly payments

By Deanna Swift 

Bush_signsWASHINGTON, DC—It seems like only yesterday that President Bush was announcing to the world that he had plenty of political capital on hand—and was well prepared to spend it. But just 5 months after Mr. Bush touted his political liquidity experts say that the well has all but run dry, forcing the President to do what millions of Americans are now doing everyday: apply for an interest-only loan.

The loan will give Mr. Bush the cash he needs to cover expenses—including this summer's blockbuster 'Social Security on the Verge of Collapse-a-pa-loo-za' tour—while allowing him to make payments solely on the interest of the loan for the duration of his presidency. But experts caution that should Mr. Bush's presidency lose value, he could be stuck with a big bill down the road.

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What happened to all that capital?
Like any American with a taste for cheap money, President Bush must first meet with a financial advisor to find out if an interest only loan is right for him. The financial advisor will take a close look at Mr. Bush's finances, including his cash-on-hand and his debits and credits since the beginning of 2005. Among the questions such an advisor is likely to ask: what happened to all of the capital you had in January?

The endless tour becomes an endless drain
Some analysts point to the President's Social Security tour as one major drain on his capital. When Mr. Bush first kicked off one of the hottest shows in the country, he announced 60 tour dates in 60 days. But such was the demand for tickets that the President was forced to add new dates to what he has since rechristened as "the endless tour."

Costs of security, custom tour bus add up
BetoniraqAlso taking a toll on the President's bottom line has been the added cost of security for the hugely popular events. "It seems like everyone in the country wants in to these things," says a source close to the 'endless tour.' He notes that the President and his entourage roll from date to date in a custom tour bus that features leather furniture, a wet bar with full-size refrigerator, a 42-inch plasma TV, in-motion satellite system, and a five-disc CD/DVD surround sound system. "All the expenses start to pile up and before you know it you've eaten through your capital."

Interest-only loan 'makes sense'
Sources close to the President says that he became interested in the prospect of an interest only loan after learning that more than a third of borrowers in the beltway have already signed up. "He liked its flexibility and thought it was a good fit for his pocketbook," says one administration insider.

Planning for 2010

Should he be approved for the loan, the President need only pay back the interest, postponing for years repayment of the principal. That changes several years into the loan, say experts, after which the unpaid balance is fully amortized over the remaining term, obligating the President to make principal AND interest payments to the lender.

As for whether Mr. Bush will be able to swing the new, increased payments largely depends upon the value of his Presidency, say experts. "He's obviously gambling on the fact that his Presidency is going to continue to be highly valued," says the administration insider. "But if his Presidency loses value, he could lose big."

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