McCain, Obama joust over how to fix Wall Street

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(Agencies)
Updated: 2008-09-17 06:24

WASHINGTON — Barack Obama took dead aim at John McCain 's economic philosophy Tuesday, charging that the Republican presidential candidate would extend Bush administration policies that helped foster Wall Street's turmoil, while McCain proposed creating a blue-ribbon commission to study the nation's deepening financial crisis.

US presidential nominees Senator John McCain (L) and Senator Barack Obama (R) are shown in this combination of file photographs from campaign stops from July 18, 2008 in Warren Michigan (McCain) and August 4, 2008 (Obama) in Lansing, Michigan. [Agencies]

The candidates dueled as the financial world struggled to recover from the Wall Street shocks of Monday, when the collapse of Lehman Brothers and the sale of Merrill Lynch to Bank of America sent markets reeling and raised new fears of recession.

The upheaval, combined with the recent government takeover of mortgage giants Fannie Mae and Freddie Mac , stirred the US presidential campaigns. Democratic nominee Obama detailed his remedies Tuesday in a speech in Colorado , while McCain spoke in Tampa, Fla. Texts of both speeches were made available in Washington .

In some ways, the candidates sounded alike.

"Too many firms on Wall Street have been able to count on casual oversight by regulatory agencies in Washington ," McCain charged.

"When regulators are chosen for their disdain for regulation and we gut their ability to enforce the law," Obama said, "then the interests of the American people are not protected."

They also agreed that regulators are hamstrung by outmoded laws.

"Let me be clear," Obama said. "The American economy does not stand still, and neither should the rules that govern it."

That's right, McCain said. "These regulatory agencies were fine maybe in the 1930s," he said in a CNN interview Tuesday.

But there were two major areas of contrast: McCain wants a commission, and Obama blames Republicans for the current crisis.

"We have to have a 9/11 commission, and we have to fix this alphabet soup of regulatory agencies that's left over from the 1930s. We can come back from this," McCain said.

The 9/11 commission, headed by former New Jersey Gov. Tom Kean , a Republican, and former Indiana Rep. Lee Hamilton , a Democrat, studied the causes of the 2001 terrorist attack and offered a series of recommendations to help prevent another.

Obama scoffed at McCain's idea.

"Senator McCain offered up the oldest Washington stunt in the book: You pass the buck to a commission to study the problem," Obama said. "But here's the thing: This isn't 9/11. We know how we got into this mess. What we need now is leadership that gets us out. I'll provide it; John McCain won't."

Obama pledged to "streamline our regulatory agencies" in a way that "will provide better oversight and reduce costs," but he gave no details. In a fact sheet, the Illinois senator noted only that the new system must be "one that reflects 21st-century markets and that is capable of identifying where risks actually reside."

Obama was more detailed Tuesday than McCain, who was vague.

"We need to regulate institutions for what they do, not what they are," Obama said. "Over the last few years, commercial banks and thrift institutions were subject to guidelines on subprime mortgages that did not apply to mortgage brokers and companies."

McCain offered a pledge: "Honest people on Wall Street , and there are many, will have a friend in the White House when I am president."

Obama also wants more attention paid to credit rating agencies, which said that mortgage-backed bonds, and the banks that issued and purchased them, were safe when they were not.

"We must investigate rating agencies and potential conflicts of interest with the people they are rating," Obama said.

McCain promised "there will be constant access to the books and accounts of our banks and other financial institutions."

Obama repeatedly blamed the Bush administration for creating the financial mess, even though Democratic President Clinton signed the 1999 financial modernization law that tore down long-standing walls between commercial banks, securities firms and insurance companies, and Democrats have controlled Congress since January 2007 .

Obama pointed to the Republican Party's reverence for markets and disdain for government regulation as primarily to blame.

"Let's be clear," he said, "what we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed."

While he said he wouldn't fault McCain, who's been a member of Congress since 1983, for the country's economic woes, "I do fault the economic philosophy he subscribes to. . . . It's the philosophy that says we should give more and more to those with the most and hope that prosperity trickles down."

McCain, who has a solid record of voting with Senate Republicans and backing Bush administration economic policies, didn't blame any politicians, pointing his finger instead at Wall Street .

"Too many people on Wall Street have been recklessly wagering instead of making the sound investments we expected of them," he said. "And when their companies collapse, it seems only the CEOs escape the consequences."

McCain did criticize Obama when he broadened his remarks in television interviews to discuss the overall economy.

"First of all, Senator Obama wants to raise taxes," the Arizona senator told CNN. Obama proposes to raise taxes on individuals who make more than $200,000 a year and families who make more than $250,000 , while lowering them for virtually everyone else.

McCain also argued, "certainly I'm going to restrain spending in government, and Senator Obama has plans for increasing government spending dramatically."