IMPEACH BUSH

Wall Street just jumped into the race for the White House in a big way. The ongoing crisis in credit markets—and taxpayer assistance for a growing list of troubled companies—is taking center stage for both Presidential campaigns. The issue is also offering voters a peek at each candidate's approach toward greater regulation of financial markets.

Both campaigns are fervently advocating tougher government oversight—a departure from the Bush Administration's more hands-off approach to financial matters. Senator Barack Obama (D-Ill.) argues that America needs a "21st-century regulatory system" and has seized on the liquidity crisis as an indictment of Republican policies. "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 in a Sept. 16 speech in Golden, Colo.

Senator John McCain (R-Ariz.), a longtime critic of excessive government intervention, vowed on Sept. 16 to "put an end…to running Wall Street like a casino." At an Orlando rally Sept. 16, McCain called for a high-level commission to investigate the securities industry, and for ending "multimillion-dollar payouts to CEOs that have broken the public trust."

Unease on Main Street

Analysts are trying to decipher how all the rhetoric could translate into action in a new Administration. "We're going to get some sort of financial regulatory bill in 2009," says Dan Clifton, a Washington-based analyst with Strategas Research Partners, a New York investment research firm. "The question is, what will it look like? Obama says he'll reject Bush's deregulation philosophy. McCain says he'll reform Washington and Wall Street. We're waiting for their specific plans." Clifton says analysts are trying to discern whether, if elected, McCain would adopt a "pragmatic" agenda that would "balance regulation with growth," or whether he would extend Bush's legacy. "That's the big wild card about John McCain." Obama, Clifton says, is more predictable: "He's clearly about regulation."

Given the turmoil, and the unease it inspires on Main Street, what matters on Nov. 4 will be which candidate presents voters with the more effective story on how to reform Wall Street excess. Conventional political wisdom says that the campaign's shift from a debate over Alaska Governor Sarah Palin's Vice-Presidential qualifications to financial trouble should favor Obama, who is quickly drawing connections between the crisis and Bush policies—and McCain. At the Colorado School of Mines, Obama pinned the blame for the crisis squarely on the Republican philosophy of deregulation. Still, Obama has had trouble making headway among many independent and low-income voters (BusinessWeek.com, 8/24/08) who backed Senator Hillary Clinton (D-N.Y.) in the Democratic primaries.

For its part, the McCain campaign is working to position the longtime Senate "maverick" as ready, willing, and able to clean up a broken financial system. McCain's financial commission would be modeled on the kind of panel that investigated the 2001 terrorist attacks. "We need to set up a 9/11 Commission in order to get to the bottom of this and get it fixed and act to clean up this corruption," McCain said in an interview with CBS.

McCain's Populist Turn

Obama quickly ridiculed the idea. "Instead of offering up concrete plans to solve these issues, Senator McCain offered up the oldest Washington stunt in the book: You pass the buck to a commission to study the problem," Obama said. "That's how we got into this mess." Obama referenced a speech he made in March on financial-market overhaul at Cooper Union in New York. At that event, Obama recommended extending commercial-banking regulations to investment banks, hedge funds, and mortgage brokers. He also called for a commission to monitor threats to the financial system.

McCain's rhetoric has sharpened as the financial crisis has unfolded. In a Sept. 15 speech he maintained that the fundamentals of the economy are still strong; he later claimed he was referring to the strength and innovation of American workers. "We've seen self-interest, greed, irresponsibility, and corruption undermine these hard-working American people," McCain said Sept. 16 in Florida, a day after his campaign released a new television commercial focused on Wall Street turbulence: "Our economy is in crisis. Only proven reformers John McCain and Sarah Palin can fix it." The ad continues by saying a McCain-Palin Administration will propose "tougher rules on Wall Street to protect your life savings, no special-interest giveaways, and lower taxes to create jobs."

Both candidates will continue to position themselves as reformers of a financial system that's gone off the rails. What's not clear is how much more turmoil Wall Street has in store before the election—or how much change the public will demand.

Herbst is a reporter for BusinessWeek.com in New York.