MICHELE NORRIS, host:
Now to what the presidential candidates have to say about the latest financial drama. This morning, John McCain repeated a statement that's drawn criticism from Barack Obama in the past. McCain said, quote, "The fundamentals of our economy are strong." Then he quickly had to backtrack. McCain and Obama appear to agree on at least thing, that Wall Street's problems reflect a failure in Washington. NPR's Scott Horsley has the story.
SCOTT HORSLEY: For years, Wall Street eagerly financed high-risk mortgages, helping to inflate the nation's housing bubble. Now that bubble has popped. Many Americans can't repay their risky home loans, and Wall Street firms are stuck with gum all over their face. Campaigning today in Colorado, Barack Obama called it another example of Main Street's financial woes trickling up.
Senator BARACK OBAMA (Democrat, Illinois; 2008 Democratic Presidential Nominee) Today offers more evidence, Colorado, that too many folks in Washington and on Wall Street weren't minding the store. For eight years, we've had policies that have shredded consumer protections, that have loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans.
HORSLEY: Obama says he doesn't blame John McCain for these problems, but he does blame the economic philosophy that he says McCain subscribes to.
Senator OBAMA: 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.
HORSLEY: Obama's comments today echo remarks he made back in March at New York's Cooper Union in which he criticized the banking deregulation of the late 1990s. Instead of a necessary updating of banking rules, Obama said, the government had adopted a, quote, "winner take all, anything goes," environment that helped foster devastating dislocations in our economy.
One of the leading architects of that deregulation effort was McCain's former campaign co-chairman, Phil Gramm. As a Texas senator, Gramm helped write the law that relaxed the nation's banking rules. Then, after leaving the Senate, Gramm became an executive and lobbyist for the Swiss banking giant UBS at a time when banks were fighting to loosen rules against predatory lending. Obama says that reliance on the unfettered free market is dangerous.
Senator OBAMA: It's a philosophy that says even common-sense regulations are unnecessary and unwise, one that says we should just stick our heads in the sand and ignore economic problems until they spiral into crises.
HORSLEY: Gramm has been one of McCain's key economic advisers, but he officially left the campaign this summer after making the impolitic comments that America was a nation of whiners and that the country was merely suffering from a mental recession. McCain himself initially seemed to downplay the severity of the economic slowdown today during a campaign appearance in Florida.
Senator JOHN MCCAIN (Republican, Arizona; 2008 Republican Presidential Nominee): Our economy, I think, still, the fundamentals of our economy are strong, but these are very, very difficult times.
HORSLEY: McCain's observation about strong fundamentals drew immediate fire from the Obama campaign, and by this afternoon, McCain was singing a different tune.
Senator MCCAIN: I know Americans are hurting now. And the fundamentals of our economy are at risk. They are at risk, the great workers, the great innovators, because of the greed of Wall Street.
HORSLEY: It's awkward for a Republican candidate to make that kind of charge during a Republican administration. But here, again, McCain is hoping he and his running mate will be seen as reformers, although he offered no specifics of what their reform might look like.
Senator MCCAIN: The McCain-Palin administration will replace the outdated patchwork quilt of regulatory oversight and bring transparency and accountability to Wall Street. We will bring transparency and accountability, and we will reform the regulatory bodies of government.
HORSLEY: A McCain spokesman added this is a time to update rules, not relax them, suggesting a break with the campaign's former co-chair. McCain also said in a written statement that he is glad the federal government is not putting taxpayer money at risk to bail out Lehman Brothers. Although McCain endorsed the government's rescue of Fannie Mae and Freddie Mac last week as necessary to prevent a financial breakdown, neither he nor the Bush administration see Lehman's collapse as posing the same kind of systemic risk. Scott Horsley, NPR News, Grand Junction, Colorado.