Seeking to exploit the latest news of Wall Street woes, Senator Obama is placing blame on the Bush administration's economic policies while Senator McCain is decrying "greed" on Wall Street.
In statements responding to the downfall of Lehman Brothers and Merrill Lynch & Co., both presidential candidates appeared to call for additional regulation of the market. Neither offered much in the way of details about what particular regulation they would seek.
The failure of the two investment banks to survive the credit crisis, as well as the Treasury Department's recent takeover of Freddie Mac and Fannie Mae, all but guarantees that the two candidates will be pressed to develop their stances on when, if ever, government ought to intervene to save failing financial institutions.
One Democratic legislator yesterday said he believed the worsening financial woes would give a boost to Mr. Obama.
"Who is going to get blamed" for financial institutions being on "life support?" Rep. Gary Ackerman, a Democrat of Queens and a member of the House Financial Services Committee, asked. "It's the Republicans who are the regulators. You're talking about all of George W. Bush's agencies who are responsible for regulating."
After Lehman Brothers yesterday filed for bankruptcy and Merrill Lynch was bought by Bank of America, the Dow Jones Industrial Average fell more than 500 points, the largest drop since the market reopened after the attacks of September 11, 2001.
Mr. McCain, speaking yesterday from Orlando, Fla., struck a populist tone, saying the fundamentals of the American economy — which he identified as "the American worker and their innovation, their entrepreneurship," and small businesses — remained strong.
"From Washington to Wall Street, the top of our economy is broken," he said. "We've seen self-interest, greed, irresponsibility, and corruption undermine these hardworking American people. We're going to put an end to the abuses in Washington and on Wall Street that have resulted in a crisis that we are seeing unfold today."
The Arizona senator's sole specific economic proposal in the speech was to "stop multimillion-dollar payouts to CEOs that have broken the public trust." He did also call for "the outdated and ineffective patchwork quilt of regulatory oversight in Washington" to be overhauled.
In a statement sent out by the Obama campaign early yesterday morning, the Illinois senator blamed "the most serious financial crisis since the Great Depression" on "eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans."
Both President Bush and the Treasury Secretary Paulson spoke of the resilience of the American economy.
During an appearance in the Rose Garden with the president of Ghana, Mr. Bush expressed confidence that in the long run "our capital markets are flexible and resilient and can deal with these adjustments."
Mr. Paulson said he was "committed to working with regulators here and abroad, as well as policy makers in Congress, to take additional necessary steps to maintain the stability and orderliness of our financial markets."
On Capitol Hill, however, the legislative proposal that appeared to receive the most attention in light of the news from Wall Street was a second economic stimulus package that Democrats are pushing.
In statements, both Senator Dodd, the chairman of the Senate Committee on Banking, Housing, and Urban Affairs, and Majority Leader Reid called for such a package, which could include extending unemployment and food stamp benefits and additional spending on highways.
"As we continue to monitor these and other recent events," the ranking Republican on the banking committee, Senator Shelby, said in a statement, "it is the responsibility of the Banking Committee going forward to conduct a thorough review of how they transpired and what the implications are for global finance, the banking system, the U.S. economy and the American taxpayer."