Magazine article American Banker

From Candidates, Conflicting Stances on Mortgage Mess

Magazine article American Banker

From Candidates, Conflicting Stances on Mortgage Mess

Article excerpt

Byline: Joe Adler

WASHINGTON - The two major presidential candidates took different approaches Friday to news that the Treasury Department was working on a way to create a facility to buy up illiquid assets.

Sen. John McCain used a campaign stop to outline his own plan to create an entity that would attempt to detect problem companies in the financial sector and restore them to health. But details on his idea remained vague and the Arizona Republican used much of his speech to criticize Sen. Barack Obama and his ties to Fannie Mae and Freddie Mac.

"Sen. Obama did nothing" to curb abuses at the two government-sponsored enterprises "and actually profited from this system of abuse and scandal," Sen. McCain said. "While Fannie and Freddie worked to keep Congress away from their house of cards, Sen. Obama was taking their money. ... We've heard a lot of words from Senator Obama over the course of this campaign, but maybe just this once, he could spare us the lectures and admit to his own poor judgment in contributing to these problems."

In contrast, Sen. Obama offered a neutral account of the crisis during a press conference flanked by former regulators, including former Treasury Secretary Robert Rubin, now at Citigroup inc., and former Treasury Secretary Lawrence Summers. The Illinois Democrat said he had spoken with Treasury Secretary Henry Paulson and delayed the release of his own financial initiative until he could study details of the administration's plan.

"You don't" propose a solution "in a day," Sen. Obama said. "We've got to do it in an intelligent, systematic, thoughtful fashion. I'm much less interested at this point in scoring political points than I am in making sure that we have a structure in place that is sound and is actually going to work."

The Bush administration is trying to enact legislation before Congress expires next week, but it is clear the new president will ultimately inherit and largely implement the plan in January.

The details of the Treasury's plan "will certainly be significant" to the candidates, "because one of them is going to have to deal with it," said Larry Sabato, the director of the University of Virginia's Center for Politics.

The conventional wisdom is that the market instability presents a bigger liability to Sen. McCain, whose party has controlled the White House during the financial meltdown. However, if the Bush administration does calm the capital markets, it could give Sen. McCain a boost.

"If they don't straighten it out, and it continues to spiral, then I think that that's going to be great" for Sen. Obama, said Edward J. Kane, a finance professor at Boston College and a senior fellow in the Federal Deposit Insurance Corp. …

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