Politicking may delay US bailout

McCain criticises amount of power being given to Treasury Secretary

(AFP/GETTY)

Partisan political bickering reared its head to potentially delay the bailout of Wall Street yesterday when John McCain said he was "deeply uncomfortable" with the amount of power being handed to the Treasury Secretary, Henry Paulson.

The Republican presidential candidate called for the creation of a bi-partisan board to oversee approval of the $700bn (£380bn) rescue package. However, political sparring over the response to the worst financial crisis since the Great Depression has prompted fears that the bailout could be delayed.

Barack Obama has issued a warning about the plan and listed seven conditions he believes should be imposed. But he also said that if elected in November, he wants Mr Paulson to work with his presidential transition team.

"That doesn't necessarily mean that he'd end up being the Treasury Secretary," he said, adding that those involved in the financial crisis, as well as defence and intelligence, need to be "deeply involved in the transition process".

Mr Obama has been briefed daily by Mr Paulson for the past two weeks and speaks highly of the former head of Goldman Sachs – one of only two surviving Wall Street investment banks.

Yesterday, in the battleground state of Wisconsin, Mr Obama was preparing to tell voters that he supports the government's bi-partisan efforts. To avoid "partisan wrangling" he also delayed revealing his own detailed plans for the crisis, drawing instant criticism from his opponent.

However, the Democrat has said that any bailout must include plans to recover the money, protect working families and big financial institutions and be designed to prevent such a crisis from happening again.

"This plan can't just be a plan for Wall Street, it has to be a plan for Main Street." he said. "We have to come together, as Democrats and Republicans, to pass a stimulus plan that will put money in the pockets of working families, save jobs, and prevent painful budget cuts and tax hikes in our states."

The rescue plan emerged from Mr Paulson's conviction that the financial markets were staring at an abyss, but prominent conservative economic experts, who a few days ago defended him, are now voicing doubts about what one described as an "extremely dangerous plan".

Politicians on the right are also objecting. Newt Gingrich said "watching Washington rush to throw taxpayer money at Wall Street has been sobering and a little frightening," adding he "hopes Congress will slow down and have an open debate".

Senator McCain was campaigning in Scranton, Pennsylvania, yesterday, in part of the state where he is more than holding his own against Mr Obama. He used the opportunity to challenge certain aspects of the Paulson plan. Rather than hand enormous power to Mr Paulson, he said he would establish a bi-partisan oversight board to make sure taxpayers' dollars were spent wisely.

He said the board should be made up of "the most respected people in America", such as the tycoon Warren Buffett – who supports Senator Obama – Mitt Romney, the former Republican candidate, and Michael Bloomberg, the Mayor of New York, "instead of putting all this responsibility on a person who may be gone in four months".

The financial crisis is working in the Democrats' favour and undermining the push by conservatives, including Mr McCain, to inject more market forces into government-run or regulated programmes. He is now being assailed on the campaign trail for trying to get Americans to invest their social security taxes in the stock market.

A new Obama advert says: "Social security has never been more important but John McCain voted three times in favour of privatising social security." It accuses Mr McCain of "risking social security on the stock market".

Mr Obama is also lashing out at his opponent on health care, drawing attention to a magazine article he wrote calling for "more vigorous nationwide competition, as we have done over the last decade in banking".

"They said they wanted to let the market run free, instead they let it run wild," Mr Obama told a 20,000-strong crowd in North Carolina on Sunday. "Now this great 'deregulator' wants to turn his attention towards health care."

Mr Obama has been talking to congressional leaders as well as Bill and Hillary Clinton as he prepares his own detailed response to the bailout. But he is using the crisis to attack Republican policies that he says Mr McCain is committed to continuing.

"We're now seeing the disastrous consequences of this philosophy," he declared. "Yet Senator McCain, who candidly admitted not long ago that he doesn't know as much about economics as he should, wants to keep going down the same disastrous path."