Economic Crisis, Act II

McCain & Obama’s differing attitudes toward tackling the economic crisis has kept the country, already reeling from the financial saga, focused on the presidential race. Act II of this saga: McCain’s risky, indeed maverick, move to delay the first debate is considered by liberal MSM & polled voters as a mistake, while conservative proponents view his decision to focus on the economy as presidential and verification that McCain does indeed put “Country First.” Obama remains focused on his campaign (easily able to handle both debate & legislation to save the economy), quick to voice caution, and reluctant to return to Washington (though he did come back for a meeting today at the behest of the current President).

Right now, the Presidential Debate Commission says the Friday debate is still on, and whether it’ll turn into an Obama stump speech is definitely possibility. Is this crisis really important enough for either Obama or McCain to postpone their campaigns, or does the crisis merit more discussion (i.e. debate) from the candidates for voters to better determine how they would act as President?

Brookings published simple explanation of the crisis in “A Brief Guide to Fixing Finance”

1. The bubble in home prices, fueled by the ready availability of credit, resulted in an underestimate of the risks of residential real estate;
2. The peaking of residential home prices in 2006, combined with lax lending standards were followed by a very high rate of delinquencies on subprime mortgages in 2007 and a rising rate of delinquencies on prime mortgages;
3. Losses thereafter on the complex “Collateralized Debt Obligations” (CDOs) that were backed by these mortgages;
4. Increased liabilities by the many financial institutions (banks, investment banks, insurance companies, and hedge funds) that issued “credit default swaps” contracts (CDS) that insured the CDOs;
5. Losses suffered by financial institutions that held CDOs and/or that issued CDS’s;
6. Cutbacks in credit extended by highly leveraged lenders that suffered these losses.

McCain characterized the consequences of these actions in his address yesterday (my bolding),

We must pass legislation to address this crisis. If we do not, credit will dry up, with devastating consequences for our economy. People will no longer be able to buy homes and their life savings will be at stake. Businesses will not have enough money to pay their employees. If we do not act, ever corner of our country will be impacted.

Many have called for the debate to go on and believe that is political suicide for McCain to suspend his campaign. Perhaps so. McCain has made clear, political stratagem or no, that he is going to live up to his pay grade and develop an appropriate solution and build congressional consensus behind economic legislation.

Obama’s statement on the economy urged congress to focus on the “broad principles” that he & McCain put forth (my bolding).

There are times for politics, and then there are times to rise above and — politics, and do what’s right for the country.

So, in my mind, actually, it’s more important than ever that we …try to describe where we want to take the country and where we want to take the economy, as well as dealing with some of the issues of foreign policy that were initially the subject of the debate.

Indeed, in this statement, Obama highlights just how much he speaks,

I have been in constant contact with leadership in Congress. I have talked to Secretary Paulson just about every day. I spoke to him twice today…

I have spoken to congressional leaders every day this week. I have spoken to Secretary Paulson every day this week.

But, keep in mind, again, I’m talking to Nancy Pelosi, Harry Reid, the congressional leadership, Hank Paulson, I’m talking to them every single day.

We have an economic crisis with the potential to financially cripple millions of lives - the absence of liquidity in the markets has serious ripple effects that must be addressed. Congress must submit a timely, appropriate solution signaling confidence in the market system to prevent companies from artificial or premature collapse (from investor panic and liquidity calls).

The difference between the two candidates is starkingly clear. McCain is a man of action & risk (indeed as a military officer, he had to quickly assess the situation and act - or else face death). Obama feels the need to “describe” the issue to convince voters of how he would act - a step shy of acting himself. Voters need to decide if the saying, “actions speak louder than words,” really has merit after all.

To be continued in Act III.

Technorati Tags: Economy, McCain, Obama, Presidential Debate