New proposals: On the stump Monday, Obama and McCain jumped on the stock market turmoil with plans on how to fix it. (Chris Carlson/AP)
Wall Street’s turmoil tests McCain
Obama goes on the attack with a new ad, while the GOP candidate calls for an investigation.
By Linda Feldmann | Staff Writer/ September 16, 2008 edition
Washington
With Wall Street embroiled in crisis, both major presidential candidates have jumped to the fore with proposals.
John McCain, the Republican, faces the tougher challenge. Fairly or not, as the nominee of the party controlling the White House, Senator McCain faces the prospect of guilt by association. McCain spoke on seven morning talk shows Tuesday, proposing a 9/11-commission-like investigation into what has led to the string of collapses of major financial institutions.
“This is a result of excess and greed and corruption,” McCain said on MSNBC. “And that’s exactly what is plaguing Americans today. And we got to fix it and we’ve got to update our regulatory system. We have to have a 9/11 commission to find out what went wrong and to fix what’s going to happen in the future so this never, ever happens again.”
Barack Obama, the Democrat, had billed an appearance in Golden, Colo., Tuesday as a speech focused on “his plans to revamp our regulatory framework, push back against special interests, and grow the American economy,” according to his campaign.
But the headline out of the speech was his rejection of McCain’s idea for a commission, calling it “the oldest Washington stunt in the book.”
“You pass the buck to a commission to study this problem,” Senator Obama said.
As for his own ideas, Obama repeated proposals for financial reform he laid out last March, including a proposal to apply commercial banking regulations to investment banks, hedge funds, and mortgage brokers.
At the very least, the collapse of Wall Street giant Lehman Brothers and the shotgun sale of Merrill Lynch over the weekend, followed Monday by the largest one-day drop in the Dow Jones Industrial Average since the 9/11 attacks, have abruptly ended the campaign’s “lipstick on a pig” detour and dampened the all-Sarah-Palin-all-the-time media frenzy.
Obama clearly senses an opening. His campaign jumped on McCain’s comment Monday that “the fundamentals of our economy are strong” and produced an ad around that statement. The ad repeats the clip three times, and skips the rest of the sentence – “but these are very, very difficult times.”
Obama has typically scored better with voters than McCain on his ability to handle the economy – but not by much, and he does not do as well as generic Democrats versus generic Republicans on the economy.
This is where Obama’s youth and relatively short résumé may be holding him back. Thus the effort to put out a little more detail Tuesday on what he would do as steward of the economy and of a financial system in turmoil.
In general, the two candidates take different philosophical approaches toward regulation of financial institutions, with Obama favoring more regulation and McCain consistently favoring deregulation during his 25 years in Congress. In the wake of recent developments, however, both McCain and his running mate, Alaska Governor Palin, have talked about tighter regulation. Obama and McCain agree that the federal government was correct not to bail out the bankrupt Lehman Brothers investment bank.
For Obama, there may be a danger in putting out a detailed plan to address the crisis.
“One thing you learn in presidential campaigns is that specifics don’t win you elections,” says Stan Collender, a budget expert at Qorvis Communications, a Washington, corporate communications firm. “In fact, it probably loses you votes in many cases. I would think that what he’s going to try to do is talk about this as the excesses of the Bush years come to light.”
McCain, as the GOP nominee, faces the greater challenge as he tries to distance himself from President Bush. “He’s got the most incentive to come up with some new ideas as to what should be done,” says Campbell Harvey, a business professor at Duke University in Durham, N.C.
McCain could also be weighted down by his own admitted lack of expertise on economics, and the fact that one of his top economic advisers is Phil Gramm, former chair of the Senate Banking Committee. Democrats and their allies, such as AFL-CIO union president John Sweeney, note that former Senator Gramm cosponsored a 1999 law that allowed for the consolidation of commercial and investment banks.
The long-term impact of Wall Street’s crisis on the campaign has not yet played out.
“If this turns out to be a phenomenon with no immediate and direct impact on millions of Americans, it won’t necessarily have a big impact on the election,” says John Pitney, a political scientist at Claremont McKenna College in Claremont, Calif. “If all of a sudden everyone in the housing market suddenly finds out mortgages are unavailable, at that point it becomes a much bigger deal.”
Mr. Pitney also does not see McCain as trapped in a no-win situation. In calling for tightened regulation of Wall Street – a position that does not please free marketeers in the GOP – “McCain can say this is very much in the tradition of Theodore Roosevelt,” says Pitney. “He can say, just because he’s a limited government conservative doesn’t mean he’s an antigovernment conservative.”
Comments
2. jc | 09.16.08
Dear John
You have been in the Senate for over 25 years and have not paid attention to anything that has been going on have you?
There is NO regulatory system. Your President Reagan deregulated the banks years ago.
p.s.
I can see why you were at the bottom of your class at the Naval Academy.
3. Paul | 09.16.08
Yeah, follow the money:
http://www.opensecrets.org/pres08/sectors.php?sector=E
McCain knows nothing about the economy, but the oil companies sure do love him, as they do Palin.
Maybe if the financial sector had been more heavily regulated during the Bush administration, we wouldn’t have these bogus loans being bundled up and sold to banks, which would eventually collapse from the loss due to the scam. Obama has been for and is for regulation, while McCain has been AGAINST and is now for regulation, since it’s politically convenient.
4. allen | 09.16.08
this is sick–the republicans are hurting the nation. kick them out–John Mccain is a dishonorable old fool who is trying to pull the wool over our eyes. he wants to cheat working americans into the grave. He belongs in a retirement community talking about his POW days–not in the white house–incompetatnt OLD heartless brainless fool.
5. erik | 09.16.08
I ask everyone to do what they can to keep McCain and Palin out of the White House. During the industrial revolution you didn’t innovate with the idea of buying more horses to battle the combustion engine. In the tech-Info revolution you did not win by buying more envelops, stamps and typewriters to compete with email the internet and computers. This ticket is running on the mantra drill-baby-drill? Yes we need oil and for the next 50 years but to start the diversification of energy is the single greatest opportunity we have before us today. It represents a full 360 of benefits.
Donate to the Campaign that represents this because the RNC have a money machine that will not stop.
6. ishok | 09.16.08
Why do we as Americans continue to use our votes on these zetas and omegas… bottom-of-classers and housewives with torn families? When will we realize that we can’t afford to do this anymore. It was cute there for a while to send the Gomers and Goobers to Washington. There was a sense of delightment in watching what we had created. Our regular guy orderin’ the elites around. Eating jelly beans and nappin’ off in some of the meetin’s. Struttin’ around at NASCAR events. But there is down side to all of this and the symptoms are evident. The war in Iraq. Hurricane Katrina. The mortgage crisis. The Banking meltdown on Wallstreet. The Afghan War….
JUST IN: The Gomers and Goobers now want to take on Iran, China and Russia.
7. Motownmom | 09.16.08
I hope that the American people can see that McCain and Palin are out of touch. Even after what happened yesterday McCain says that we have a strong economy. We are headed towards a depression. If you are not wealthy, then McCain is not for you! Obama/Biden
8. dottydo | 09.16.08
To Mr. Obama,
Please return your campaign contributions for Fannie May and Freddy to decrease the amount of money I have to pay to pick up their tab.
I never intended to donate to your campaign, and I resent being forced to do so as a taxpayer who has to resolve missing money.
Put the money , where your mouth is.
To Mr. Mc Cain
I am pleased about one thing. Oil companies love you and Palin, but Arabs are freaked out that we might delete them or compete with them over oil.
Please consider an old problem that cropped up in the 1980’s.
When alcohol (denatured) was produced in volume as a fuel alternative, Congress refused to tax it as fuel , and instead forced the tax rate as the same as consumable alcohol. It completely shut down the shift to the fuel.
Please correcdt that price gouging error by Congress, if possible, from your position as President.
9. When Elephants Fly | 09.16.08
Comments welcome: http://whenelephantsfly.blogspot.com
With regard to this election, the biggest elephant in the room should never have been John McCain or Sarah Palin. It should have always been the economy!
McCain’s top economic advisor (Gramm) spearheaded the legislation that deregulated default credit swaps, which is, in large part, what caused the huge mess we’re in.
Despite what John McCain’s rose colored glasses will tell you, we are witnessing serious economic disaster. The casualties include Bear Stearns, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, and Country Wide Loans, among others. These are no small casualties. Up until a few months ago, you would never, in a million years, have though that all of these companies would evaporate. This is due to bad policies by the current administration.
The same Republican mindset that created these problems cannot possibly fix them. Instead, they just plan to make things worse for most Americans. John McCain will increase the tax burden on the middle class, while giving huge breaks to his cronies. (No wonder his wife can afford to buy yet another pair of $300,000 earrings and no wonder he lost track of how many houses he owns.) To add insult to injury, McCain will also tax the value of the healthcare benefits I receive from my employer. So, if you expect to need any additional medical care of if you have a special needs child, you will be in a world of financial hurt.
With huge gas prices and staggering unemployment, Americans are already struggling to make ends meet. With McCain-Palin in office, whatever is left of the middle class will be obliterated and will be living in poverty. Please, we can not afford to make the same mistakes of the past eight years!
To see how honorable John McCain is, take a look at: http://hk.youtube.com/watch?v=cLfsG8XKWfw&feature=related
Comments welcome: http://whenelephantsfly.blogspot.com
10. Dylan Voltaire | 09.16.08
McCain–the flip flopper! He will say or do anything to be president.
Do not re-elect the plutocratic Republican party. They mean you no good. His policies will hand this country to the Chinese on a golden platter.
Say no to Lipstick Lies.
Obama/Biden for Real Change.
11. VOA | 09.16.08
McCain has always supported deregulation for business. Now he says he is for regulation. I guess he is the candidate of change; he will change his stance to whatever he thinks will get him elected. His policies have ruined the countries economy, shrank the middle class, and caused irreparable harm. He offers no solutions, just more of the same Keating-Five-style, friend-to-big-business politics. Why would anyone cast a vote for him?
12. VOA | 09.16.08
To Dottydo:
Why don’t you ask the CEOs and CFOs of Fannie and Freddie to return their golden parachutes? Why don’t you ask McCain to return the value of all of the favors and gifts he receieved for stripping away the regulations on the banks. Have you noticed that the banking crises always happen under the control of Republican governments who emphasize deregulation? What did you think would happen? Wake up! Smell the coffee. You can’t elect guys who are in the pocket of big business.
13. Devilstower | 09.16.08
Good news, dottydo. As a taxpayer you’re -not- contributing to Obama’s campaign, because he’s not taking public funds. Nor is he taking funds from lobbyists.
But you’ll be happy to know that McCain is taking both.
14. Steven | 09.16.08
I suppose Phil Gramm didn’t do anything illegal, but I’d still like to see him incarcerated in one of those golf prisons that politicians go to. He could play a round with Bush & Cheney.
15. Tillie | 09.16.08
Thank you Sam Reed and Nancy Pelosi…I may not have agreed with George Dubya on many issues but my family was always employed. Since the Democrats took ownership of the House and Senate the whole country’s economy has suffered from their excesses and poor economic decisions! My wife has lost her job and my investments are as weak as the morals of the current majority of Congressman and Senators!
I can only imagine what will happen if the Democrats occupy all three houses! People think that the President runs this country but it is the House and Senate who are our checks and balances. A majority by one party reveals the agenda of one party and if they are dominated by greed and corruption as shown by both Pelosi and Reed, we see the fruits of their incompetencies coming to pass. Get real, Obama has no back bone and will just be a puppet to those who are actually to blame for our economic woes!
16. Transoniq1 | 09.16.08
McPain is an outrageously decrepit wing nut, akin to the neo-con kabal formerly known as Rumsfeld-Wolfowitz-Feith et al., Inc. His econimic policy simply rests on pumping up the military-idustrial complex creating virtually nothing of value. He has failed to regulate the border in his home Senatorial state - ARIZONA!!! McPain fails to grasp the concept of initiating a massive and rapid technological energy diversification plan. Painlin is unbelievably irresponsible by ignoring modern scientific and obstetrical advice by getting pregnant at 44 and giving birth to a Down Syndrome baby in light of the overwhelming statistics pointing to a thousand-fold increase in the risk of creating a genetic anomoly at her advanced menopausal age. She is the ex-mayor of the largest meth-lab trailer park city in Alaska. Their exhibited disengagement from reality is so stark that it invokes a complete collapse of logic and reason.
17. AF | 09.17.08
A more balanced story would have exposed that McCain’s fundamental ideology would have done nothing to prevent collapse of any industry that could have benefited from regulation. Obama’s economic experience is heads and tails above McCain’s because McCain doesn’t have much - and McCain himself has admitted as much (see NYT). He doesn’t even know how many mansions and condos he owns. Give me a break. Oh, and Palin can see Russia from Alaska so God knows this prepares one for anything, including as an expert of foreign policy.
And to reply to a blogger who asserts that we’re in the trouble that “we’re” in because there is a D majority in both houses — do your homework! The D’s don’t have enough votes in the Senate to override a filibuster, and that is the fundamental reason why you aren’t seeing any progress there. Sorry, your line makes a good soundbite, but you know, we have enough of those floating around. Do your homework.
18. Eric Don Anderson | 09.17.08
“McCain–the flip flopper! He will say or do anything to be president. ” My wife gets the credit for this: “The McChameleon campaign!”
19. Kb | 09.17.08
A Recipe for Economic Failure
Just as Cindy McCain has stolen her Cookie recipe from Hershey’s, John McCain is stealing his economic plan right from the George W. Bush playbook. He is ill at ease when speaking about his plan for the economy because he knows he has been a direct supporter of the deregulation that caused the failures in our economy. Deregulation has allowed the Wall Street crowd to behave as chipmunk’s hording up all their acorns and leaving the scraps for the average American. His one moment of honestly was when John McCain admitted “The issue of economics is not something I’ve understood as well as I should”. Where does he get his economic vision from? McCain says “some of my best friends have opinions about economic policy”. And who are these best friends? Seven of them run his campaign, and they are lobbyists for big oil, pharmaceutical, foreign dictators, and failed Wall Street giants. Doing more of the same again and again and telling people that they can expect different results does not make you a maverick. At best, it makes you insane. At worst, a liar.
McCain is not telling the truth, about the economy, or Barack Obama. Barack Obama’s middle class tax cut gives 95% of working Americans a tax cut of up to $1,000. He will crack down on predatory lenders, punish corporations who send American jobs overseas, reform requirements on all regulated financial institutions and streamline our regulatory agencies. “This time - this election - is our chance to stand up and say: enough is enough!” (Barack Obama, 2008)
20. Donald | 09.17.08
Thank you Sam Reed? The Secretary of State of Washington? Who is a republican? What exactly sir, are you smoking? Congress cannot work efficiently if they have an inept and incompetant person who is supposed to execute the bills they attempt to pass. It certainly is difficult to pass any changes in Congress when the president simply vetoes everything and then simply issues executive orders to circumvent congress.
21. Brian | 09.17.08
Regulations alone are not the answer. People have to realize that the foundation of our economy is debt. If every consumer where to pay off their debt and only make purchases with cash they have on hand, our economy as it is structured today would crumble. The economic growth of the last two decades has been an illusion. The house of cards was bound to come tumbling down. We need to have a strong foundation for our economy like back in the manufacturing heyday.
22. Alice | 09.17.08
I used to like McCain, but am bothered by the fact that he’s always stretching the truth these days. I’m starting to have serious questions about whether he’s fit for the Presidency (not to mention his unqualified choice for VP). We’ve got serious economic and foreign policy issues to deal with. McCain’s no spring chicken and has been in Washington for over 25 years. He’s had lots of time to bring about reform — why should we believe he’s really going to start now?
23. Andy | 09.17.08
Whoa!!!!
It was Clinton in 1999 who pushed and got the legislation permitting banks to become investment institutions as well as traditional banking…McCain voted against that legislation and was very outspoken on the dangers of such a major change in our country’s financial infastructure…Democrats…get a grip on the major reasons…the banks…that we’re being hosed !
24. benny | 09.17.08
Before Reagan became president, if you buy a house you get a loan from an S&L. The loan stays with that S&L until it is all paid. The S&L makes it sure you are qualified and capable to pay because it is their depositors’ money you are borrowing. Then came Reagan and his deregulations. Now you most likely get a loan from a mortgage company who is only interested in collecting their points on your loan. It then packages these loans and sells the package to some other financial institutions. The package undoubtedtly contains some questionable loans. The packages can then be resold several times. When the music stops, whoever is holding the bag will find out what is inside but it is too late.
25. Annette | 09.17.08
I see WW3 coming if McCain, Palin are elected. Both said, they will attack Iran and Russia if they don’t do as demanded. China said, should America attack Iran, both China and Russia will Stand against America. We are in War with Iraq and Afghan, might as well add Iran, Russia and China to the list, but this time, the bombs could be falling on own land and our people because America is no longer the Big Boys over the World anymore, these Nations also have nuclear weapons.
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1. deepthroat | 09.16.08
Follow the money
http://www.opensecrets.org/pres08/sectors.php?sector=Fx