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September 20, 2017

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Meltdown reveals candidates' colors

The meltdown on Wall Street has taken center stage in the news, but behind the curtain of political posturing and incessant attack ads, we can take a peek at how Senators John McCain and Barack Obama are reacting to a real crisis during the countdown to the presidential election on Nov. 4.

The one thing the candidates agree on is the need for a bailout to stabilize the financial markets. That should surprise no one, even though objections are coming from both sides of the vast American political divide.

Both the most conservative and the most liberal lawmakers are expressing serious reservations about Treasury Secretary Paulsen's US$700 billion fund to buy mortgage assets from distressed banks. Although McCain and Obama are taking more centrist-populist positions in support of a bailout, the routes the two candidates have taken to this point reveal much about what they might or might not really stand for and how they operate.

As the crisis unfolds, Arizona Sen. McCain has shown himself to be the master of rapid response. He initially opposed the U.S. government takeover of Fannie Mae and Freddie Mac, the federally backed corporations that together account for more than half of all home mortgages in the U.S. This position was entirely consistent with conservative philosophy and McCain's long record of advocating deregulation and opposing government interference in financial markets.

Once the government seized these key mortgage lenders, Sen. McCain supported the move. He might have believed that this would avert the crisis that followed, for he reassured his supporters on Monday, Sept. 15, that the fundamentals of the U.S. economy are still good. This came in the face of Merrill Lynch's fire sale to the Bank of America and Lehman Brothers bankruptcy filing.

Sen. McCain changed positions later that day, blaming Wall Street's problems on unbridled corruption and greedy speculators. Responding rapidly to the changing political and economic scene, he subsequently explained to network television that what he really meant about good economic fundamentals was that American workers are the best in the world.

"I believe in American workers, and someone who disagrees with that — it's fine," he said.

As the crisis worsened last week, McCain on Tuesday called for a commission to find out what happened and propose solutions. On Wednesday, he blamed the crisis on CEO's with golden parachutes. On Thursday, he pointed the finger at the Securities and Exchange Commission, and said he would fire the chairman for lax oversight. By the end of the week he abandoned calls for a commission and made it clear that "the American economy is in a crisis." Following Treasury Secretary Paulson's lead, he voiced strong support for a bailout package that the Secretary and Fed Chairman Bernanke promised for the weekend, urging immediate Congressional action.

Give Sen. McCain credit for ability to abandon his long-held conservative principles about regulation and reverse course when the situation calls for it. McCain now is calling for urgent passage of legislation that would include a bipartisan board to oversee the bailout. His support for a series a series of conditions proposed by Obama and Congressional Democrats marks a remarkable change in the candidate, whether or not you believe that McCain and Palin are the true change agents in this election.

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