Obama Blames Financial Crisis on Republican Economic Policy

By Cornwell, Rupert | The Independent (London, England), September 16, 2008 | Go to article overview
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Obama Blames Financial Crisis on Republican Economic Policy


Cornwell, Rupert, The Independent (London, England)


Barack Obama has expanded his call for stricter control of the US financial sector into an across-the-board attack on the laissez- faire economics championed by Ronald Reagan, pursued by President George Bush for the past eight years, and embraced by the Republican candidate for the White House, John McCain.

The Democratic presidential candidate said he was not blaming Mr McCain in person for "the most serious financial crisis since the Great Depression" , but "the economic philosophy he subscribes to," based on tax cuts for the wealthy and the habit of "ignoring economic problems until they spiralled into crises".

During the Bush years, that philosophy insisted that "even commonsense regulations are unneccessary and unwise", with the result that the administration had sat on its hands as problems turned into crises - the latest being the convulsions on Wall Street.

Whatever its ultimate consequences, the crisis now shaking Wall Street seems bound to lead to greater federal government regulation of the financial sector, whoever wins the presidency in November.

And while the political fallout of the turmoil was not immediately clear, the more painful the effects of the upheavals on the wider economy the greater the impact will be on the election campaigns.

On past precedent, the crisis should work to the advantage of the Democrats, as the party out of power and thus not "responsible" for the crisis - and as the party with the reputation of having the economic interests of ordinary Americans at heart, rather than a favoured few.

However, as much as Mr McCain's handlers like to project him as an anti-establishment rebel, the Republicans have always been seen as the party of corporate America and of Wall Street, for whose current plight public sympathy is zero. With both campaigns now under pressure to produce detailed plans to tackle the crisis, the Arizona senator's admission that economic matters were not his strong suit may also come back to haunt him.

Even before the demise of Lehman Brothers, both candidates had come out against a federal bailout for the stricken investment bank, arguing the notion of "moral hazard" must be returned to financial markets.

But trapped between his support of most of Mr Bush's policies, including the $1.6 trillion of tax cuts, and his need to distance himself from a desperately unpopular administration, Mr McCain confined his fire to the excesses of the banks and investment houses, leaving the sharper attack to his Democrat rival.

The Lehman bankruptcy, Mr McCain said, was but "the latest reminder of ineffective regulation and management" that plagued the financial sector.

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