Newt's Million-Dollar Blunder
Did Tiffany's give Gingrich a sweetheart deal? Or could you too get a $1 million credit line?
GOP presidential hopeful Newt Gingrich has problems. His senior campaign staff recently resigned en masse. His poll numbers are low, and his unfavorability ratings are high. And he's become a figure of delighted derision in light of news that he held at least two lines of credit —one for as much as $1 million—with the high-end jeweler Tiffany & Co. How do you get such a line of credit? And was Gingrich getting a sweetheart deal on his blue-boxed diamonds?
Gingrich has released as little information as possible about his accounts and what they bought. Last month, Politico reported that Gingrich owed up to half a million dollars to Tiffany's in 2005 and 2006, based on personal financial disclosure forms his wife, Callista, filed when she was working for the House Agriculture Committee. The public filings show that in both years, Newt owed Tiffany's between $250,001 and $500,000 via a "revolving charge account." Gingrich described as the account as a "standard no-interest account."
This week, Gingrich's campaign announced that his own financial disclosure forms would show that the family also had a second line of credit with the jeweler. A Gingrich spokesman told Chris Cilizza at the Washington Post that "the Gingriches had a $500,000 to $1 million line of credit at Tiffany's" adding that it "has a zero balance, and it has been closed."
So what kind of deal were the Gingriches getting? Let's start with the first line of credit. In her disclosure forms, Callista Gingrich describes the six-figure debt as a "revolving charge account." This is not a "standard no-interest account," as Newt asserted. It is a credit card, and Tiffany's happily offers creditworthy customers cards with state-specific rates. The Gingriches have homes in Georgia and northern Virginia. In both of those states, the annual APR on a Tiffany's charge account is an eye-watering 21 percent.
The disclosure does not make clear just how much was spent or when. The Gingriches could have charged $250,001 to $500,000 and then carried the balance from year to year, accruing more than $30,000 in interest. They could have charged and later paid off between $250,001 and $500,000 of jewelry in both years. Or they could have done some combination thereof.
But the fact that Newt described the account as "no interest" is mysterious. Did the Gingriches get a reprieve on interest payments from Tiffany's? Or was Newt confused or obfuscating about the account?
Statements from Tiffany's clarify a bit: The Gingriches had both a credit card and an interest-free line of credit with the company—the "standard no-interest account" seems to be the one announced more recently. Indeed, Tiffany's offers yearlong interest-free loans to borrowers who spend more than $1,000 on an engagement ring or $5,000 on other Tiffany pieces, provided that they have good credit and that they are already Tiffany credit card holders.
The company calls them Tiffany Time Accounts, and while it does not advertise them on its website or in promotional materials, it readily offers them in-store to goose customers to buy more expensive engagement rings or other baubles. Still, Gingrich fudged the explanation a bit—these are not normally "revolving funds," as he initially said. The store requires payment within a year. (Of course, Gingrich could have had a special understanding. On that point, he has not clarified.)
Such premium payment options are not uncommon at Tiffany's or other high-end jewelers. (You, too,could get a seven-figure loan from Tiffany's, provided you had good enough credit and were buying pricey enough pieces.) Many swanky stores and luxury chains offer financing, in the form of interest-free loans, standard loans, and credit cards. They also cut sweetheart financing deals for their best customers or for celebrities and other VIPs. There's nothing illegal or unusual about it.
Gingrich protests that the lines of credit imply nothing extraordinary about him. He insisted to Face the Nation that he's just a "guy running for president who pays all of his bills" and that he lives a "very frugal" life.
But the Gingriches spent, at a bare minimum, $750,000 on Tiffany pieces. There is the distinct possibility they paid an amount equivalent to the median American's salary just on interest to Tiffany's. That hardly seems frugal.
Annie Lowrey, formerly Slate’s Moneybox columnist, is economic policy reporter for the New York Times.
Photograph of Newt and Callista Gingrich by Mark Hirsch/Getty Images.