A Test of Leadership
THE FAILURE of the House of Representatives to pass the $700 billion plan to unclog the credit markets represented a colossal failure of American leadership -- not just by President Bush and the congressional leadership but also by the Republican and Democratic presidential nominees. Sens. John McCain and Barack Obama each tried to use the crisis to their political advantage last week while stopping short of giving their unqualified support to the legislative package worked out over the weekend. When the bailout was voted down, they quickly joined the pointless and puerile fingerpointing of House Republicans and Democrats.
In the aftermath of Monday's political collapse, the facts are these: The country is now threatened with a devastating economic unraveling if action is not taken to allow government intervention in the financial markets. President Bush and the House leaders have already demonstrated that they are unable to muster the votes necessary to pass the legislation they crafted with Treasury Secretary Henry M. Paulson Jr. Either Mr. Obama or Mr. McCain will inherit this crisis in less than four months. They should both be using every means of persuasion they possess to get members of their parties to support a rescue bill.
Fortunately, both candidates took some productive steps Tuesday. Mr. Obama acted first, issuing a statement that stressed the necessity for quick congressional reconsideration of the Paulson plan. Mr. Obama correctly pointed out: "We are unlikely to succeed if we start from scratch or reopen negotiations about the core elements of the agreement." But he suggested that the plan on the table, under which the Treasury would buy "toxic" securities held by banks and other institutions, be supplemented by an increase in federal insurance for bank deposits, from $100,000 to $250,000. The FDIC later indicated it was moving in that direction.
Mr. McCain also endorsed the increased insurance limit in an interview with Fox Television. He also proposed that the Treasury use funds already at its disposal to shore up banks and to begin buying up the distressed mortgage-backed securities. Having posed as a would-be broker for a rescue deal last week while failing to get behind the one that emerged Sunday, Mr. McCain, too, finally said clearly that he favored a "yes" vote on the package. "I know that we have to act, even though we failed yesterday," Mr. McCain said. Better late than never.