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The Candidates on Financial Policy

October 2, 2008

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Issue Trackers trace the positions of candidates from the 2008 presidential campaign on major issues related to foreign policy.

Though economic matters have topped the list of voter concerns through much of the 2008 presidential campaign season, the tumult which hit the financial sector in mid-September compelled both Sen. John McCain (R-AZ) and Sen. Barack Obama (D-IL) to get into much greater detail on how they view the problems afflicting the banking and financial sectors. Both claim the "reformer" mantle, and each had offered detailed policy proposals on energy, trade, and social security. But the specific questions of regulatory reform of Wall Street really only took shape after the collapse of Lehman Brothers and the government rescue of the world's largest insurer, AIG. McCain backed the bailout (Reuters) of investment giant Bear Stearns in March, which was sold to JP Morgan Chase at a discounted rate with taxpayers guaranteeing its debt. Obama was a bit more cautious in his response to the Federal Reserve's intervention in Bear Stearns. "I wasn't privy to Bear Sterns balance sheets. But I think the idea that the Federal Reserve has to step in in emergency situations is something I wouldn't challenge," he said in an interview with CBS News. Both campaigns supported larger interventions in September, when the government absorbed mortgage giants Fannie Mae and Freddie Mac, intervened to stave off the collapse of AIG, and made hundreds of billions of dollars available for possible future loans.

McCain and Obama, as well as their respective running mates, Gov. Sarah Palin (R-AK) and Sen. Joe Biden (D-DE), all say they support major reforms to improve regulatory oversight of financial institutions and to protect taxpayers from assuming future risk. Public record searches generally support the Obama campaign's contention that their candidate favored moves to shore up government regulation of thrifts and investment banks earlier than the McCain camp, which stressed the GOP orthodoxy-deregulation-until serious problems appeared in the banking system in September.

Generally, the Democratic ticket blamed financial turmoil on the Bush administration's deregulatory philosophy, which Obama characterized as "we should give more and more to those with the most and hope that prosperity trickles down to everyone else." McCain and Palin, meanwhile, attributed the problems (WashPost) to the "greed and mismanagement of Wall Street and Washington," and insisted that a Democratic administration invariably would overact and enact regulation that would retard future economic growth and innovation.