Amy Chozick and Laura Meckler – “Obama, Bernanke Talk Economy”

Obama, Bernanke Talk Economy
Democrat Seeks Tougher Oversight; A Call to Paulson

Amy Chozick and Laura Meckler | July 30, 2008

Keeping the presidential campaign focused on economic issues, Barack Obama met with Federal Reserve Chairman Ben Bernanke, while John McCain criticized his rival’s proposals to raise taxes.

Sen. Obama, the presumptive Democratic nominee, on Tuesday discussed the current financial crisis and his proposals for tougher oversight of financial institutions with Mr. Bernanke. He also talked by phone with Treasury Secretary Henry Paulson.

Republican candidate Sen. McCain, meanwhile, talked about the need to help people hit by the housing crisis and the need to break U.S. dependence on foreign oil. Speaking at a town-hall meeting in Sparks, Nev., Sen. McCain said his rival’s requests for home-state earmarks are part of the problem and that Mr. Obama’s plans to raise taxes would only hurt the economy.

The continued focus on economic issues underscores their importance with voters this election cycle. “We’re moving into unchartered [economic] ground. How you show you’ll go about navigating that is going to be very important,” said John Irons of the Economic Policy Institute, a liberal think tank in Washington.

Obama spokesman Michael Ortiz said the senator had “an informative meeting” with Mr. Bernanke about the health of the U.S. economy and the risks of further economic deterioration. Mr. Ortiz said Sen. Obama made clear his respect for the independence of the Federal Reserve system.

In March Sen. Obama proposed broadening government regulation of financial markets and expanding the power of the Federal Reserve to oversee investment banks in certain cases.

His plan would allow the Fed to set capital and liquidity requirements for securities firms that borrow money from the central bank. Currently, the Fed only has such power over commercial banks, but has had some oversight over securities firms after it started lending to them in March.

According to campaign aides, Sen. Obama reinforced to Mr. Paulson his support for housing legislation passed by Congress last week and awaiting President Bush’s approval. That bill would give the Treasury secretary wide authority to rescue lending giants Fannie Mae and Freddie Mac.

Sen. Obama told Mr. Paulson he “believes the new housing legislation should be used as a way to protect homeowners and not bail out shareholders or managers,” Mr. Ortiz said.

The Federal Reserve and the Treasury Department declined to comment on the meetings.

Sen. McCain has also expressed support for legislation to bail out Fannie Mae and Freddie Mac. “We reached a situation that, if these institutions failed, the impact on millions of innocent Americans could be severe,” he said in an interview Sunday with ABC News.

But the Arizona senator has been highly critical of the institutions. “In the case of Fannie and Freddie, we should stop their lobbying activities. We should eliminate the pay and bonuses that these people rake in.”

Sen. McCain has held several discussions with Messrs. Bernanke and Paulson since he clinched the Republican nomination in March. This was Sen. Obama’s first talk with the two officials since he captured the Democratic nomination in June. Mr. Bernanke’s term ends in January 2010 and the next president will decide whether to renominate him. The Obama campaign stressed that Tuesday’s meeting with Mr. Bernanke is Senate business and isn’t part of the campaign schedule. Mr. Bernanke meets regularly with lawmakers.

Sen. McCain weighed in on economic issues during Tuesday’s town-hall meeting, in part by criticizing his opponent’s economic plans.

Sen. Barack Obama spoke to the media after meeting with the House Democratic caucus in Washington Tuesday.

“Sen. Obama says he’s going to change Washington but his solution is to simply make government bigger and raise your taxes to pay for it. We’ve been doing that for years, my friends, and it hasn’t worked,” Sen. McCain told supporters in a high-school gymnasium.

The McCain campaign has come down hard on Sen. Obama’s plans to raise taxes for families making $250,000 a year or more, and argues that his plan would also affect people earning less than that.

On Tuesday, Sen. McCain singled out his rival’s plan to raise the rate at which capital gains are taxed, saying that would affect many moderate-income earners.

“I think the worst thing that could happen to America in these very tough economic times.. . is to raise someone’s taxes,” Sen. McCain said. “I won’t do it.”

There could be exceptions, though. Over the weekend, Sen. McCain repeated his position that the best way to solve the Social Security insolvency problem is for a bipartisan group to work out a solution together. Everything would be on the table, he said, including tax increases.


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