Plans take a back seat to reality

Economic blueprints put on hold

CORAL GABLES, Fla. - With the federal government moving dramatically again yesterday to restore confidence in the country's troubled financial system, Senators John McCain and Barack Obama both advocated federal intervention in the economy and traded ever-sharper barbs over whom to blame for the mess.

Though neither candidate offered new, specific solutions, McCain and Obama were forced to respond, as they have all this week, to yet another dose of ominous economic news and unprecedented action in Washington. Federal officials yesterday halted short-selling on some financial stocks, guaranteed billions of dollars to bolster money market investments, and promised to create a taxpayer-funded mechanism to take on hundreds of billions of dollars in distressed mortgages and other bad debt.

The stakes for both candidates could hardly be higher, as the presidential race is now focused almost exclusively on the perilous state of the economy. Both campaigns had suggested they would outline sweeping new economic plans yesterday, only to pull back into more of a wait-and-see posture.

At the Chamber of Commerce in Green Bay, Wis., McCain mostly reiterated prior proposals designed to shore up the mortgage market and ease investors' concerns, such as requiring more disclosure by financial firms and toughening laws against those who commit fraud or manipulate the market.

He described an initiative to permit the Treasury to lend money to troubled financial institutions in exchange for federal oversight until they recover, allowing them to continue to operate as private companies. The authority, which he called the Mortgage and Financial Institutions Trust, would serve as "an early intervention program to help financial institutions avoid bankruptcy, expensive bailouts, and damage to their customers," McCain said before the Federal Reserve and Treasury announced they were crafting a sweeping bailout plan. A spokesman said McCain was still reviewing it.

"It's clear financial firms have lost the trust of the American people," he said at the earlier rally. "That trust cannot be regained unless we adopt some fundamental reforms. Government has a clear responsibility to act and to defend the public interest. That is exactly what I intend to do."

McCain again asserted that the financial meltdown was a failure of government oversight, though he himself has long advocated fewer restraints on the private sector. He reiterated his call for Christopher Cox, chairman of the Securities and Exchange Commission, to resign because accountability needed to return to Washington, and said that the Bush administration was partially responsible for the problems besetting Wall Street. He also said the Federal Reserve needs to stop bailing out troubled financial firms, though he has supported such bailouts over the last few weeks.

Obama, after huddling in Coral Gables with his top economic advisers, including Lawrence Summers and Robert Rubin - Treasury secretaries under President Clinton - said it would be premature to unveil anything new when officials at the Treasury Department, the Federal Reserve, and in Congress were working on emergency measures to keep capital markets functioning, companies afloat, and homeowners in their houses.

"We've [got to] do it in an intelligent . . .thoughtful fashion," he told reporters.

"I'm much less interested in scoring political points than making sure we have a structure in place that is sound and is actually going to work."

Still, seeking to calm fears about the integrity of the economy, Obama called for swift action in Washington.

Obama said he agreed with granting the "broad authority" to the Treasury Department for its rescue plan, but laid out principles he wanted to see included, saying any plan must assist homeowners, not just financial institutions, and must not include lifelines for irresponsible CEOs, lenders, and shareholders.

"We don't want bailouts of folks who have been making bad decisions," he said.

"But what we also want to make sure of is the economic system as a whole continues and ordinary people are able to wake up on Monday and keep doing what they've been doing."

He also stood by his tax cut proposals aimed at the middle class, saying they can still be paid for and are needed "more than ever."

McCain spent much of his Wisconsin speech going after Obama, assailing his tax proposals and accusing him, as the recipient of financial and political support from the leadership of failed lending giants Freddie Mac and Fannie Mae, of holding responsibility in the current collapse.

"Maybe just this once he could spare us the lectures, and admit to his own poor judgment in contributing to these problems. The crisis on Wall Street started in the Washington culture of lobbying and influence peddling, and he was right square in the middle of it," McCain said, alluding to Obama's ties to James Johnson, a former Fannie Mae executive who briefly led Obama's vice presidential search team.

Speaking later to an arena full of screaming supporters at the University of Miami, Obama had a sharp retort for his rival.

"It's pretty clear that Senator McCain's a little panicked right now," Obama said.

"At this point he seems to be willing to say anything or do anything or change any position or violate any principle to try to win this election. I've got to say, it's kind of sad to see."

Obama, who continued his barrage of criticism of McCain for his past support for deregulation, added a new line of attack at yesterday's rally. He noted McCain's support for partial privatization of Social Security, asking voters to imagine what would be happening if that had been approved.

"When I'm president, we're not going to gamble with Social Security," he said.

Scott Helman reported from Coral Gables, Fla., and can be reached at shelman@globe.com. Sasha Issenberg reported from Green Bay, Wis., and can be reached at sissenberg@globe.com.