Financial meltdown reshapes U.S. race

The Star

Financial meltdown reshapes U.S. race

Tim Harper

WASHINGTON–There is no gilt-edged economic accomplishment in Barack Obama's resumé that helped propel him through Democratic party ranks.

Over 26 years in the U.S. Congress, Republican John McCain has been the maverick, the reformer, the national security bulldog, but nothing during those years readied him for the likes of this week's challenge.

Yet today there is finally clarity in a muddled U.S. presidential election campaign – one of these men will be elected Nov. 4 because voters trust him to restore American prosperity, return sanity to the chaos on Wall Street and allow the heartland in the United States of Anxiety to sleep without worrying that their retirement funds are evaporating and their home is about to be lost.

There is really no other issue.

These two men with their thin economic backgrounds had to grapple this week with America's worst financial crisis since the Great Depression.

The decisions made by a President McCain or a President Obama will cascade well beyond Wall Street and Main Street, driving much of the economic future of Canada and the world.

If history is a reliable guide, those decisions will be made by Obama.

This is not the terrain on which McCain wanted to fight this election.

Traditionally, incumbent parties pay for economic distress at the ballot box, and only once since World War II have American voters given one party three consecutive terms in the White House.

That political truism is being driven home in 2008, with George W. Bush facing historically low popularity ratings before this latest financial meltdown, and McCain cannot shake a candid comment he once uttered on the campaign trail, admitting the economy was not his strong suit.

The crisis also drags Bush, McCain's biggest liability, back into the spotlight and ends his Sarah Palin-driven bounce in popularity.

Any week in which bankruptcies, bailouts and wild stock market fluctuations supplant talk of hockey moms and lipstick on pit bulls is a bad week on the trail for McCain.

Yet history has not always been the barometer of choice in handicapping a race that has broken new ground on a number of fronts.

A USA Today/Gallup Poll released yesterday indicated 29 per cent of registered voters said the financial crisis would make them more likely to vote for Obama, but 23 per cent said it would make them more likely to back McCain.

Obama has a four-point national lead, but a series of battleground states destined to decide this race remain too close to call.

While neither man was chosen to carry their party banner because of their economic expertise, they are also essentially on the sidelines looking in at a week in which global investors lost $3 trillion amidst what has been described as a once-in-a-century economic meltdown.

They have had to cede ground to Treasury Secretary Henry Paulson and Federal Reserve chair Ben Bernanke, who prepared the largest taxpayer bailout in American history – a package that could be worth as much as $1 trillion – during a week in which the venerable Wall Street firm Lehman Brothers collapsed, Merrill Lynch was unloaded in a fire sale and American International Group was bailed out by Washington for $85 billion.

At week's end, stock markets rebounded, but uncertainty abounded.

Obama endorsed the administration's plan yesterday.

"This is a worldwide issue, and while the United States can and will lead in stabilizing the credit markets, we should ask other nations, who share in this crisis, to be part of the solution as well,'' Obama said in Miami.

He spoke following a meeting with his economic brain trust, many of the same advisers who helped Bill Clinton preside over eight years of prosperity in the 1990s.

They included billionaire investor Warren Buffett; former Federal Reserve chair Paul Volcker; former treasury secretaries Robert Rubin, Lawrence Summers and Paul O'Neill; and Laura Tyson, former head of the Council of Economic Advisers under President Clinton.

"The events of the last few days have made it clear that we must take further bold and decisive action to shore up confidence in our financial markets and avoid a deepening economic crisis that could jeopardize the life savings and well-being of millions of Americans,'' Obama said.

The Democrat laid out four principles for recovery, stressing any plan must address the needs of not just Wall Street, but Main Street. He said the Washington plan must be temporary and must be coupled with "tough new oversight and regulations of our financial institutions,'' and he said it cannot reward reckless CEOs at the expense of taxpayers.

He said the plan must be co-ordinated globally with the major economies of the G20.

McCain tried to regain his footing during a stop in Wisconsin.

"We're going to start where the need for reform is greatest,'' McCain told supporters. "In short order, we are going to put an end to the reckless conduct, corruption, and unbridled greed that have caused a crisis on Wall Street.''

McCain said he would create a Mortgage and Financial Institutions Trust that would act as an early warning system to identify weak financial institutions and intervene before the companies were on the brink of collapse.

"Any action should be designed to keep people in their homes and safeguard the life savings of all Americans by protecting our financial system,'' McCain said.

"There are certainly plenty of places to point fingers, and it may be hard to pinpoint the original event that set it all in motion. But let me give you an educated guess.

"The financial crisis we're living through today started with the corruption and manipulation of our home mortgage system.''

McCain is huddling with an economic team much different from Obama's. It includes his top adviser, former congressional budget office director Douglas Holtz-Eakin; Stanford University professor and George H.W. Bush adviser John Taylor; former eBay CEO Meg Whitman; and one-time Hewlett-Packard CEO Carly Fiorina.

McCain sought – often unsuccessfully – an elusive balance between optimism to buck up a reeling nation and concern to acknowledge the reality of the situation.

On the day of the biggest plunge in stock values since the 2001 terror attacks, McCain again told the country the fundamentals of the economy were sound, then spent most of the next 24 hours trying to put his comments into the proper context.

The next day, Holtz-Eakin got a little overheated touting the Republican nominee's economic expertise, claiming his role on the Senate commerce committee helped create "the miracle'' of the Canadian-made BlackBerry.

One day he said a federal bailout for the giant AIG would be a mistake; the next day, after the Federal Reserve bailed out the insurance giant, McCain said it had no choice.

Months after he bluntly told Michigan voters that many of their jobs would not be coming back – a nod to reality that cost him the state Republican primary – he told the same auto workers that they would not be "hung out to dry'' while Washington kept other companies afloat.

Late in the week McCain called for the firing of Republican Security and Exchange commissioner Christopher Cox, even though the president does not have the power to sack him and it was not clear Cox was culpable in the meltdown. (McCain later modified his stance, saying he would ask for Cox's resignation.)

McCain had to ground Fiorina after she said Palin was not qualified to lead a major corporation, then tried to right her wrong by admitting McCain wasn't qualified either – or Obama or his running mate Joe Biden, for that matter.

Obama had his own cringe-inducing moment of optics, talking about the economic hardship of middle America on the same day he attended a $28,500-per-ticket Hollywood fundraiser featuring singer Barbra Streisand.

But in the scorn and ridicule sweepstakes, Obama won the week.

He said rather than firing Cox, voters had the opportunity "to fire the whole trickle-down, on-your-own, look-the-other way crowd in Washington who has led us down this disastrous path.''

And he took aim at McCain's pledge to take on the "old boys network'' in Washington that delivered this crisis to the American electorate.

"Take on the old boys network. The old boys network?'' Obama said during a stop in Nevada.

"That's a staff meeting in the McCain campaign.''