WASHINGTON-Presidential candidates John McCain and Barack Obama have put forth a new idea to bailout the bailout legislation. But the candidates are trying to avoid the term "bailout," opting instead for "economic rescue plan." In an atmosphere where stocks are plummeting and surging on news from Washington, word choice does matter.
They are calling for the government to insure consumers' bank deposits up to $250,000, over and above the current federal limit of $100,000. The new twist reaches out to the average taxpayer, one of the sticking points for representatives facing reelection. The House of Representatives voted down the Bush administration's $700 billion plan Monday. The 228-205 vote, with Republicans and Democrats alike dissenting, prompted the largest sell-off on Wall Street since the day after the Sept. 11, 2001, terror attacks.
"We haven't convinced people that this is a rescue effort, not just for Wall Street but for Main Street America, for working families, for small businesses, the heartland of America-all over America," said McCain on CNN's "American Morning." "We didn't do a good enough job."
The Arizona senator said he recommended to President Bush on Tuesday morning that the Treasury's Exchange Stabilization Fund of $250 billion be used to shore up institutions, that the limit on federally insured deposits be raised to $250,000, and that the Treasury exercise its ability to buy up $1 trillion in mortgages.
Obama also spoke to President Bush Tuesday morning. In a statement earlier in the day, the Illinois senator said starting over shouldn't be an option for Congress as lawmakers consider their next move in the wake of the House's rejection of what he called "the economic rescue plan." Obama said, "Given the progress we have made, I believe we are unlikely to succeed if we start from scratch or reopen negotiations about the core elements of the agreement. But in order to pass this plan, we must do more."
The Democratic candidate said the current federal guarantee of up to $100,000 in bank deposit insurance, a limit set nearly 30 years ago, is adequate for most families but insufficient for many small businesses. Raising the limit to $250,000 "would boost small businesses, make our banking system more secure, and help restore public confidence in our financial system," he said.
But the candidates aren't exactly engaging in bipartisan politics-both campaigns rolled out fresh advertisements tying the other to the Wall Street crisis.
A two-minute Obama commercial promotes his economic plan and accuses McCain of following President Bush's policies. "I know that that we can steer ourselves out of this crisis," Obama says in the spot. "But not by driving down the very same path."
"Can it get any worse?" asks a new RNC commercial airing in six states. It says Obama's economic plan "will make the problem worse" with new taxes, new spending, and new debt.
The presidential campaign has become entirely about the financial crisis and who can best handle an economy in peril. Iraq, foreign policy, education, and health care have largely fallen to the wayside as each campaign tries to chart a course to the presidency over the next five weeks in extraordinarily choppy economic waters.
Normally, campaign strategists can forecast what the political environment will look like and what the impact of a candidate's action or response will be-and position their candidate accordingly to reap political benefits.
Not so when financial markets are involved. Their ups and downs are incredibly difficult to predict, making the fallout of each candidate's reaction to the crisis also difficult to know.
Since congressional leaders and the president failed to sway Congress on the legislation, new leadership from the candidates may bring momentum back to the "rescue" legislation. And while Treasury Secretary Henry Paulson says there are "insufficient" options for a new plan at this point, Congress certainly won't swallow the plan as is.
The Federal Deposit Insurance Corp., an independent federal agency created in 1933, insures deposits in banks and thrift institutions for at least $100,000. Premiums paid by member institutions and investment earnings in Treasury securities fund the agency, which has an insurance fund of more than $49 billion, according to the FDIC's website.
The FDIC has the power to help floundering banks considered fundamental to the economy, and the agency exercised that power yesterday to ensure the sale of Wachovia to Citigroup by agreeing to absorb future losses from Wachovia's loan portfolio. The government's shotgun approach to helping financial institutions won't work for long, according to Paulson, pressing further the need for swift legislation.
The Associated Press contributed to this report.