"Presidential Leadership In Financial Crisis"

Barack Obama proposed reforms on Monday to rein in practices that led to the worst U.S. financial crisis since the Depression, while White House rival John McCain touted his own remedies and accused Obama of failing to provide leadership.

McCain, the Republican presidential candidate, pushed a plan he offered last week calling for an independent panel to oversee a Wall Street bailout that could cost as much as $1 trillion. He said Treasury Secretary Henry Paulson had too much power in the crisis.

"This arrangement makes me deeply uncomfortable," McCain, an Arizona senator, told a gathering of Irish-Americans in Scranton, Pennsylvania. "When we are talking about a trillion dollars of taxpayer money, 'trust me' just isn't good enough."

Wall Street has been rocked by the worst financial crisis since the Great Depression, with global credit markets seizing up over concerns about the plummeting value of U.S. housing and securities based on home mortgages.

The Bush administration moved last week to restore calm in the markets, asking Congress to approve a plan that would enable the government to acquire up to $700 billion in home and commercial mortgages. The move aims to stabilize the firms by taking the bad assets off their books.

The crisis has dominated the campaign trail over the past week as Democrat Obama and Republican McCain tried to project leadership and outline the principles they believe should guide the process -- although both have been essentially sidelined as the bailout is negotiated.

A CNN poll released on Monday indicated more Americans think Obama would do a better job handling an economic crisis than McCain.

In the poll of 1,020 people conducted Friday through Sunday, 49 percent said Obama would display good judgment in an economic crisis, compared with 43 who said the same about McCain.

According to the poll, Obama has a 10-point lead over McCain on the question of who would better handle the economy overall.

At a campaign rally in Wisconsin, Obama said he would aim to prevent another crisis by pushing for measures to curb the influence of lobbyists, streamline and strengthen regulatory agencies, crack down on no-bid government contracts and make government more open and transparent.

"No matter what solution we finally decide on this week, it is absolutely imperative that we get to work immediately on reforming the broken politics and the broken government that allowed this to crisis to happen in the first place," he told a crowd of about 6,000 in Green Bay.

The first-term Illinois senator said an "ethic of irresponsibility" had swept through government, and McCain -- a four-term Arizona senator and 26-year veteran of Washington who has largely favored deregulation -- was part of the problem.

"When it comes to regulatory reform, Senator McCain has fought time and time again against the common-sense rules of the road that could have prevented this crisis," he said.

McCain called for a bipartisan board to establish criteria for which firms get government help. He suggested billionaire investor Warren Buffet -- an Obama supporter -- as a potential member, as well as former Republican presidential candidate Mitt Romney and independent New York Mayor Michael Bloomberg.

McCain said his plan would keep people from losing their homes while protecting the capital markets, and he needled Obama for failing to put forward his own suggestions.

Obama has delayed offering a detailed plan while the solution is being hammered out in Congress.

"At a time of crisis, when leadership is needed, Senator Obama has simply not provided," McCain said. "And the truth is that we don't have time to wait for Senator Obama's input to act."

Q. What would you do about a situation like the current financial crisis that threatens depositors and seemingly threatens the financial system? What would you do differently than what President Bush has done?

Nader: Well, I would have tried to prevent it. Now that you got the mess, so let's back up. I was constantly against the AEI [American Enterprise Institute] and Heritage and Cato's deregulation mania.... This is a crisis that was born out of deregulation, letting them do whatever they want, Financial [Services] Modernization Act of 1999, Robert Rubin, [President] Clinton, so on. Once the restraints were off, once there was not enough disclosure and regulation, then the risk assumption became crazy. As the corporate lawyers develop more and more of these financial instruments, collateralized debt obligations in their various forms, the banks, investment banks, brokers began taking them and handing them off. It was a classic bubble and totally preventable.... It was basic greed, excessive power and speculation. What a cocktail.

Q. So how do you fix it?

Nader: What you do is you reassert a regulatory framework. You give investors far more authority because they could not control executive compensation. Warren Buffett has said, and he's right, that executive compensation is at the root of a lot of this because what it does -- it provides an incentive to cook the books, inflate the profits, shove aside the debt and make the company look better, and an incentive to keep inflating the profits by taking on more and more risk.

So, number one, regulatory framework. Number two, empower the investors, which include the institutional investors. They're the ones who own the company; they don't control anything. They're told, "If you don't like what we're doing at the top, sell your shares." So it's an exit, not a voice. We've got to put the owners back into a control posture, which is an essential principle of capitalism.... All right, so regulation, power to the shareholders, and finally reciprocity.... So if they want to bail them out with subsidized loans, the taxpayer has to get stock warrants in return. So if the companies revive, the taxpayer gets paid plus. This was done in the late '70s with the Chrysler bailout.

Q. Would you raise taxes?

Nader: Mmm-hmm. Get rid of the tax cut for the wealthy.... Our country should tax first -- before we tax human labor and necessities -- tax first that which the society likes the least or dislikes the most. So we tax securities; derivatives; speculation -- huge revenue from that tiny, tiny tax; carbon tax -- we don't like pollution; gambling industries; addictive industries -- they should be taxed more; corporate crime, that should be taxed. So you tax all these things you want to diminish through the tax power.

     Unless the Bush Administration engineers another terrorist attack or start another war before the November elections, the economy will be the number one issue, an issue that generally favors Democrats in major elections. How Obama and McCain respond to the economic crisis in the coming debates will seal or doom their Presidential hopes, as I see it. Both candidates are spewing populist rhetoric at the moment, railing against the very Wall Street corporations that are bankrolling their  multi million dollar campaigns. 

     One Presidential candidate that has not been bought  by the corporate and Wall Street powers, is Ralph Nader. Mr. Nader saw this economic collapse years ago and has some solid and well thought out solutions to the current economic crisis. Unfortunately, at least presently, the duopoly of the Democrat and Republican parties are not opening the debate to Ralph Nader or any other third party candidate. In my opinion, it is very worthwhile to examine what the third party candidates have to say about all the issues confronting America today. As Thomas Jefferson said, "Information is the currency of democracy". Listen to all the candidates for President in '08 and vote your principles.

tags: barack obama  john mccain  ralph nader  wall street  the economy  takebackamerica  politics  us  president  

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