By Robert Barnes and Michael D. Shear
Washington Post Staff Writers
Friday, September 19, 2008
GREEN BAY, Wis., Sept. 18 -- Republican presidential nominee John McCain proposed the creation of a new financial institution to head off future Wall Street meltdowns as he and his Democratic rival both groped for a more robust response to the nation's deepening economic crisis.
At a town hall rally here on Thursday, McCain accused Sen. Barack Obama of "cheerleading" the gloomy financial news, urged the ouster of the chairman of the Securities and Exchange Commission, and said that Obama's running mate believes raising taxes is "patriotic."
Obama offered a blistering response during an appearance in Española, N.M., accusing the Republican of unleashing "an angry tirade against all the insiders and lobbyists who've supported him for 26 years -- the same folks who run his campaign."
The Democrat mocked McCain's call for the firing of the SEC commissioner, saying that such a move would not erase a "lifelong record" of support for the "policies and people who helped bring on this disaster."
The tough talk was the latest iteration of rapidly evolving responses to the financial crisis that has dominated headlines and the campaign since Monday. McCain said he would offer more details Friday about "what I will do as president to fix this crisis" even as he excoriated Obama.
Late Thursday, his campaign launched a TV ad noting that Obama had received advice from Franklin D. Raines, the former head of failed mortgage giant Fannie Mae, calling it "shocking" and saying: "Bad advice. Bad instincts. Not ready to lead."
"While the leaders of Fannie and Freddie were lining the pockets of his campaign, they were sowing the seeds of the financial crisis we see today, and they also enriched themselves with millions of dollars in payments," McCain said of Obama while campaigning in Iowa. "That's not change. That's what's broken in Washington, my friends."
The McCain campaign cited a July Washington Post profile of Raines as the source for his connection to Obama. In that profile, it was reported that he had "taken calls from Barack Obama's presidential campaign seeking his advice on mortgage and housing policy matters." In a statement issued by the Obama campaign late Thursday, Raines strongly denied having provided counsel to Obama, saying: "I am not an advisor to Barack Obama, nor have I provided his campaign with advice on housing or economic matters."
McCain proposed creating a mortgage and financial institutions trust to detect and prevent spectacular failures of banks, investment brokerages and insurance companies. He also plans to propose new consumer protections, the elimination of "golden parachutes" for chief executives, and more regulation and monitoring of financial institutions, aides said.
But his campaign declined to be specific about how his proposals would work, saying they did not want to preempt McCain's more detailed discussion of those issues in a speech on Friday.
"The MFI will enhance investor and market confidence, benefit sound financial institutions, assist troubled institutions and protect our financial system, while minimizing taxpayer exposure," McCain said.
McCain also lashed out at Democratic vice presidential nominee Joseph R. Biden Jr. after the senator from Delaware defended Obama's plan to raise taxes for the wealthy by saying: "It's time to be patriotic . . . time to jump in, time to be part of the deal, time to help get America out of the rut."
Campaigning in Cedar Rapids, Iowa, McCain said: "Raising taxes in a tough economy isn't patriotic. It's not a badge of honor. It's just plain dumb."
Obama reacted to McCain's tough rhetoric in kind, addressing the crowd in New Mexico with a passion he has rarely displayed on the stump.
"In the next 47 days, you can fire the whole trickle-down, on-your-own, look-the-other-way crowd in Washington who has led us down this disastrous path," he thundered. "Don't just get rid of one guy. Get rid of this administration. Get rid of this philosophy. Get rid of the do-nothing approach to our economic problem and put somebody in there who's going to fight for you."
Obama promised more information about his plan to create a Homeowner and Financial Support Act, which he said would emerge after a meeting with his top economic advisers Friday. He said it would provide capital and liquidity to financial institutions and markets and help families restructure mortgages.
Like McCain, he offered few details about his proposal, instead repeating his vows to cut taxes for 95 percent of working families, push through a $50 billion economic stimulus plan, and provide a tax credit to struggling families that would reduce their mortgage interest rates.
"Let's be clear: What we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed," Obama said.
Democrats seized on McCain's suggestion that President Bush fire SEC Chairman Christopher Cox, noting that the head of an independent agency is legally shielded from being fired. "After 26 years in Washington, you would think John McCain would understand how things work," said Damien LaVera, a spokesman for the Democratic National Committee.
McCain advisers amended his statement, saying that he was suggesting that he would demand the resignation of the SEC chairman if he were president. "The president of the United States has the power to remove the chairmanship, and always reserves the right to request the resignation of an appointee and to maintain the customary expectation that it will be delivered," spokesman Brian Rogers said.
Meanwhile in Washington, Cox issued a statement of his own, saying: "The best response to political jabs like this is simply to put your head down and not lose a step doing the best job you can possibly do on behalf of those you serve."
Shear reported from Washington.