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It is the conventional wisdom that a dismal economic climate has historically worked in Democrats’ favor, particularly in an election year, and 2008 may be no different. Following a week filled with bad news from the nation’s financial front, the election has turned squarely back to the issues and the polls appear to be trending in Democratic nominee Sen. Barack Obama’s direction. But it has been a challenging week on the campaign trail for both Obama and Republican rival Sen. John McCain as each struggle to respond in real-time to what may be one of the greatest financial crises in America’s history since 1932. It’s a crisis that affects everyone-from Wall Street to Main Street-and nobody’s talking about pork or lipstick anymore.
“Every time you think things are settling down, something throws all of the pieces up in the air,” observes Michael Tanner, a Cato Institute senior fellow. “It has been a moderately good week for Obama for two reasons. One is that McCain had some unforced errors that hurt him, like his comment on the fundamentals of the economy, which despite being accurate was stupid and it hurt him. And just being on the economic terrain is to some degree more suitable to Obama’s message, so [the crisis] has probably helped him vis-Ã -vis the post-Palin bounce and brought things to a more even place now.”
McCain seemed to have difficulty finding his footing as the crisis unfolded, one day saying he didn’t support a bailout of insurance giant AIG and the next saying he does. He is now calling for increased regulation although he has a history of favoring more deregulation, which Tanner says will be a tough sell. In a speech delivered in Wisconsin today, McCain outlined a plan to create a Mortgage and Financial Institutions Trust to work with the private sector and regulators to identify weak institutions and fix them before they become insolvent. He also said that there has been “an excusable lack of transparency” which allowed the crisis to occur.
Obama, who months earlier had predicted a mortgage industry meltdown, has chosen instead to take a more wait-and-see approach before pronouncing any big fixes. He has however defined some principles to help guide his thinking as he meets with economic advisors that center on greater government oversight and supervision of financial institutions, regulating agencies and trading markets and creating a process that would identify risks to the financial system.
When asked at a news conference today about his approach, Obama said, “.What is absolutely clear is you don’t put together [a rescue plan] on the cuff. We’ve got to do it in an intelligent, systematic, thoughtful fashion. I’m much less interested at this point in scoring political points than I am making sure that we have a structure in place that is sound and is actually going to work.”
The financial crisis has also knocked Republican vice presidential candidate Gov. Sarah Palin off the front page. That’s good news for the Republican ticket as the focus also has