Honolulu Advertiser - Dems, GOP Blame Each Other for Wall Street Turmoil

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Honolulu Advertiser - Dems, GOP Blame Each Other for Wall Street Turmoil

By ERIN KELLY
Gannett News Service

Members of Congress reacted today to the latest turmoil on Wall Street largely by blaming each other for the nation's financial troubles.

Democrats said the bankruptcies and takeovers in the financial and housing markets can be attributed to the Bush administration's failure to police the markets and protect consumers. Republicans pointed to what they called Democrats' tax-and-spend policies.

The two sides also offered dueling legislative solutions in the wake of troubling economic news over the weekend that included the collapse of Lehman Bros. investment bank and the proposed buyout of the Merrill Lynch & Co. Inc. brokerage firm by Bank of America.

The events caused the Dow Jones stock market index to fall nearly 500 points today, its worst drop in more than seven years.

The news followed last week's government takeover of struggling mortgage lending giants Fannie Mae and Freddie Mac.

U.S. Sen. Dan Akaka, D-Hawai'i, a member of the Senate Banking Committee, said that in the short term he would be working to ensure federal regulators take action to stabilize the markets.

"The difficulties on Wall Street and in the credit markets demonstrate that we need an improved financial regulatory structure to prevent similar crises in the future," Akaka said.

Senate Majority Leader Harry Reid, D-Nev., said today that what people are seeing on Wall Street is "the legacy of the Bush-McCain economic policies that have failed this nation."

"Failing to police lenders and neglecting to protect consumers ushered in the sub-prime (mortgage) crisis that has brought the American economy and Wall Street to their knees," Reid said.

But House Republican Leader John Boehner, R-Ohio, said Democrats are themselves to blame.

"All across America, families are struggling with the fallout from the turmoil in the housing and financial markets - another sign that the destructive tax-and-spend economic policies promoted by this Democratic Congress are failing to meet the needs of workers, seniors and small businesses," Boehner said.

He proposed cutting federal spending, lifting the bans on offshore oil drilling and drilling in the Arctic National Wildlife Refuge, and reforming oversight of the markets.

Democratic leaders are pushing for passage of a second economic stimulus bill that would include an extension of unemployment insurance benefits; spending to repair the country's bridges, roads and sewer systems; more grants to help states pay rising Medicaid costs; and an extension of tax credits for companies investing in renewable energy.

Republican leaders and the Bush administration have opposed the plan as too costly.

With Congress expected to adjourn at the end of this month, there is little time to pass legislation. Analysts said they don't expect new housing legislation to pass until sometime next year, after a new Congress and president have been elected.

"Going forward, the next administration, the Congress and regulators will have to dedicate substantial time to regulatory restructuring of those departments and agencies charged with ensuring the oversight, safety, and soundness of these investment bank entities," said U.S. Rep. Mike Castle, R-Del., a member of the House Financial Services Committee.

U.S. Sen. Gordon Smith, R-Ore., who serves on the Senate Finance Committee, said federal regulators must work with the private sector to keep the situation from getting worse.

The generally partisan reaction in Congress was echoed by the two leading presidential candidates, Republican nominee John McCain and Democratic nominee Barack Obama.

Obama said he doesn't fault McCain for the financial problems, but does blame "the economic philosophy he subscribes to."

"It's the same philosophy we've had for the last eight years - one that says we should give more and more to those with the most and hope that prosperity trickles down to everyone else," Obama said in a statement.

McCain emphasized in a statement how he and running mate Sarah Palin would focus on reforming Wall Street and Washington to bring "transparency and accountability.'"

But there was some common ground. Both candidates agreed with the decision by the Federal Reserve and the Treasury Department not to bail out bankrupt Lehman Bros., according to their economic advisers.

Obama adviser Gary Gensler and McCain adviser Ike Brannon were in Washington today for an annual meeting of the National Association of Federal Credit Unions.

Both also agreed that the system of regulating financial markets is broken, with overlapping responsibility for some institutions and no regulatory oversight of others, and needs to be fixed.

Contact Erin Kelly at ekelly@gns.gannett.com. Contributing to this story were GNS writers Dennis Camire, Bill Theobald and Nicole Gaudiano.

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