Even as they sought to blame their opponents’ policies for the downturn, the presidential and vice presidential candidates made clear that they were groping for a coherent response to the federal government’s stunning role in the bailout of the insurance behemoth.
“The fact that we have reached a point where the Federal Reserve felt it had to take this unprecedented step with the American Insurance Group [sic] is the final verdict on the failed economic philosophy of the last eight years,” Sen. Barack Obama said in a statement that neither endorsed nor condemned the AIG deal.
“While we do not know all the details of this arrangement,” Obama continued, “the Fed must ensure that the plan protects the families that count on insurance.”
Under the terms of the Federal Reserve’s plan, AIG will receive a two-year, $85 billion loan in exchange for an 80 percent stake in the company.
If Obama’s response sounded hesitant, his running mate, Sen. Joseph R. Biden Jr., wasn’t any clearer.
During a speech in Maumee, Ohio, Wednesday morning, Biden never mentioned the AIG plan directly but issued a message to Wall Street executives: “Let me tell you something, if we’re going to bail you out, if we give you an opportunity, if we give corporations the inside track then you better damn well open your books to us.”
It was an impassioned, crowd-pleasing argument for corporate transparency – and it neglected to acknowledge that just one day earlier, Biden had rejected the idea of an AIG bailout, telling the Today Show: “No, I don’t think they should be bailed out by the federal government.”
Asked by a reporter at a Wednesday afternoon event whether he supports the AIG bailout, Biden sidestepped the issue.
“The truth is I don’t know what the bailout is yet. And it looks like they’re lending ‘em a little bit of money. I don’t know what they’ve done. I haven’t had a brief on it. I haven’t spoken to the Secretary of the Treasury who I’ve scheduled to speak to.” He declined to take any other questions.
Both Republicans, John McCain and running mate Sarah Palin, also dodged on the AIG bailout. Each expressed dismay at the news, but neither delivered a firm verdict on the wisdom of the decision.
“The shot that has been called by the Feds – it’s understandable but very, very disappointing that taxpayers are called upon for another” bank rescue, Palin said at a campaign stop in Cleveland.
“I didn’t want to do that. And I don’t think anybody I know wanted to do that,” McCain said of the bailout in an interview with Good Morning America. “But there are literally millions of people whose retirement, whose investment, whose insurance were at risk here.”
McCain finessed that comment later, putting out a statement further emphasizing the need to focus on AIG policyholders and saying: “We must not bail out the management and speculators who created this mess.”
Like Biden, McCain had previously expressed opposition to the notion of rescuing AIG, declaring Tuesday: “We cannot have the taxpayers bail out AIG or anybody else.”
But faced with a deepening crisis in the financial markets, no candidate on either presidential ticket has maintained an unbending position against government intervention. At the same time, neither campaign was eager to stake out an unambiguous position on the AIG rescue, a reflection of the precarious politics of federal bailouts.
For both McCain and Obama, the political risks posed by the AIGrescue are numerous. They must balance their responsibility not to unnerve markets, their prospective roles as stewards of taxpayer dollars and they must at all costs appear sympathetic to the plight of millions of Americans who hold AIG accounts. All the while they need to drive their underlying economic messages.
During the 1980 presidential campaign, Ronald Reagan also wavered on the bailout question, first criticizing President Jimmy Carter for his decision to guarantee loans to the ailing Chrysler automobile company before later, during a speech in Detroit, calling the bailout “a proper answer.”
Reagan biographer Lou Cannon, writing in the Washington Post, called Reagan’s shift “an effort to reposition [Reagan] as a born-again New Dealer sympathetic to the plight of blue-collar workers pinched by unemployment and inflation.”
More recently, in 1992, as Congress debated a large-scale bailout of savings and loan institutions, then-Arkansas Gov. Bill Clinton also made the proposed rescue plan an issue on the campaign trail, labeling the S&L crisis “the worst financial scandal in the history of this country.”
But the then-Democratic nominee carefully hedged his language on bailout proposals. In the third general-election debate, Clinton gingerly suggested: “Insofar as it is humanly possible, the banking industry itself should pay for the cost of any bank failures, the taxpayers should not.”
To the frustration of their opponents, neither Reagan nor Clinton suffered for their equivocations. In voters’ minds, the struggling economy proved reason enough to throw out the incumbent.
So far this week, the prominence of economic issues on the campaign trail has appeared to work to the benefit of Obama and Biden. Their tracking poll numbers have ticked up – on Wednesday Gallup showed Obama with his first lead since the Republican convention– as the two Democrats have aggressively attacked McCain’s support for economic policies they say helped precipitate the current economic turbulence.
“I certainly don’t fault Sen. McCain for all of the problems we’re facing,” Obama said in Nevada Wednesday. “I do fault the economic philosophy he subscribes to.”
Obama also harkened back to the savings and loan crisis as he called for a more vigorous regulatory structure, arguing: “Too many S&Ls took advantage of the lax rules set by Washington…The gambles did not pay off, and the taxpayers ended up footing the bill. Sound familiar?”
McCain, torn between his party’s traditional hesitance to intervene in markets and the political imperative of appearing sensitive to stockholders and pensioners, has castigated American financial institutions for managing their money recklessly.
“We are going to fight the greed and irresponsibility on Wall Street,” McCain said in Michigan Wednesday. In his remarks, McCain charged that Obama would raise taxes in a manner that would harm the economy.
Since the beginning of the week, though, McCain’s campaign has suffered from a number of missteps, beginning with McCain’s comment that “the fundamentals of our economy are strong,” that have tripped up GOP ticket.
But his campaign stumbled again Tuesday when adviser Douglas Holtz-Eakin defended McCain’s economic expertise by implying the senator had helped invent the BlackBerry, and when McCain supporter Carly Fiorina, the former chief executive of Hewlett-Packard, said neither McCain nor his running mate had the qualifications to run a major corporation.
As a result, the Republican ticket has struggled to find its focus at a moment when the race has called for clear messaging on the economy.
Staff writers Victoria McGrane, Jonathan Martin, Carrie Budoff Brown and Amie Parnes contributed to this story.