Obama, McCain spar over $700 bn US bailout plan

September 22nd, 2008 - 10:35 am ICT by IANS  

Washington, Sep 22 (IANS) As lawmakers and officials scrambled to finalise the Bush administration’s $700 billion bailout plan to save the US financial system from collapse, the two presidential candidates sparred over how to deal with the mess.Developed with support from the country’s central bank, the Federal Reserve, the plan would have the government buy up to $700 billion of the bad loans in the hope that this will allow financial firms to resume normal lending operations.

Addressing a convention in Baltimore Sunday, Republican nominee John McCain said he has proposed a “plan for comprehensive reform of the broken institutions that allowed this crisis to become a grave threat to our economy” as his campaign called Democratic rival Barack Obama a “directionless driver” on the economy.

“At the centre of the plan is the principle that we must keep people in their homes and safeguard the life savings of all Americans by protecting our financial system and capital markets,” McCain said, without directly criticising Obama.

However, McCain’s spokesman Tucker Bounds hit out at Obama, saying: “Two days after he confessed to not having a plan for the banking crisis, Barack Obama called for ‘decisive action’ while offering absolutely no new ideas, policies or concrete solutions - it shows he is just not ready to lead.”

At a rally in downtown Charlotte, North Carolina, Obama in turn laid the blame for the Wall Street crisis on Republican economic policies favoured by McCain.

“We’re now seeing the disastrous consequences of this philosophy all around us - on Wall Street as well as Main Street.

“And yet, Senator McCain, who candidly admitted not long ago that he doesn’t know as much about economics as he should, wants to keep going down the same, disastrous path,” he said.

Obama also attacked McCain again for favouring privatisation of social security and a more open market approach on health care.

“He calls himself ‘fundamentally a deregulator’, when reckless deregulation and lack of oversight is a big part of the problem,” the Illinois senator said. “And here’s the really scary part. Now this ‘great deregulator’ wants to turn his attention to healthcare.”

McCain Sunday also called for broad oversight of the Bush administration’s bailout plan instead of just putting all this responsibility on Treasury Secretary Henry Paulson - “a person who may be gone in four months”.

“I think we need to appoint an oversight board of the most respected people in America, such as maybe Warren Buffett, who’s an Obama supporter, Mitt Romney, Mike Bloomberg,” he suggested in an interview on financial cable TV channel CNBC.

Obama called the $700 billion price tag for bailout “staggering” and said any final package must ensure that taxpayers and homeowners were protected and should include a global response and a commitment to broad regulatory reforms that would prevent another crisis.

Meanwhile, the Bush administration insisted Sunday that Congress must move quickly to approve what one lawmaker called the “mother of all bailouts”.

Congressional leaders endorsed the main thrust of the plan, which was sent to lawmakers Saturday, saying passage might occur in a matter of days, but also wanted it to be expanded to include help for common people besides the big Wall Street financial firms.

The proposal “does not include the necessary safeguards”, said House Speaker Nancy Pelosi, calling for “independent oversight, protections for homeowners and constraints on excessive executive compensation”.

Paulson stressed that time was critical to get the proposal passed and that changes to the administration’s measure could delay that approval, further unsettling global financial markets.

The top Republican on the Senate Banking Committee, Senator Richard Shelby, said the government’s efforts would be the “mother of all bailouts” that could well cost $1 trillion when the cost of the government takeovers of Fannie, Freddie and American International Group Inc (AIG) were included.

Paulson, appearing on four of the five Sunday morning talk shows to sell the plan, said the nation’s outdated regulatory system for financial markets must be overhauled but the first job is to get the rescue package through Congress and then deal with a comprehensive regulatory overhaul next year.

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