Financial Meltdown Sidelines Politics As Usual

Last week's financial markets crises totally eclipsed the 2008 presidential campaign and changed the ground rules.

Briefings by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke terrified and then mobilized bipartisan leaders of Congress. The country's very standard of living appeared to be at stake if financial markets froze up—globally, this time, thanks to stunning technological innovations in the past decade that had spread the rewards and now the risks far beyond those, say, of the savings and loan crisis of several decades ago.

Getting swift action on a $700 billion financial aid package could restore confidence and avert a meltdown of financial systems that could freeze credit, erode retirement savings, perhaps delay paychecks and worse. The initial shock and bipartisan agreement gave way by Monday to rising complaints from Republicans about yet another federal bailout, from Democrats about giveaways to Wall Street bankers who caused this mess. Senate Finance Chairman Chris Dodd said it won't be easy but he was confident an emergency bill could be shaped this week.

In the process, the economic game plans of Barack Obama and John McCain have been derailed. The sheer cost of the bailout, more than the Iraqi war, will affect what any future president can do. Proposals on taxes—cutting them, raising them—will have to be recalibrated.

Certainly, any bantering about lipstick on a pig belongs to another campaign altogether.

Some compare the impact of what is said to be the worst financial crisis since the Great Depression to the impact of the September 11, 2001 terrorist attacks in New York and Washington. Then, the media abruptly dropped its prime-time preoccupation with a scandal about a missing intern and a California congressman.

A similar blackout prevailed on political news through the weekend, but unlike 9/11, there is no clear enemy in the financial crisis, let alone a foreign one. The unfolding financial catastrophe doesn't lend itself to calls for Americans to stay strong, to rally around, to join forces—against whom?

That said, the political impact is likely to be considerable.

National polls show a slight migration of voters toward Democrat Obama. It's not clear if that is because he's had a more coherent economic message or because McCain seemed to rail in all directions during the last week, hard put to find his footing as Wall Street unraveled.

Ordinarily, it's the Republican who has a stronger stance on all-things-economic. In this context, however, Obama looks cool and unflappable, compared to the flailing about of McCain, an economic libertarian whose record shows decades of support for less government regulation.

The snap judgment of both Democrats and Republicans about the current crisis is that far few regulators knew what was going on with these snazzy new mortgage financing instruments. They didn't ask, didn't act and didn't warn the world about the risks inherent in them if, say, real estate began to take a nosedive.

One casualty of the financial furor may be the political virtue of a "fresh face" on the scene, someone without those "fat resumes" of Washington insiders, as McCain's running mate Sarah Palin derided the political veterans.

Pro-Palin cartoonists have been painting her as a gutsy gal from the West. Boston Phoenix columnist Steven Stark said she "conforms to an old, very popular American type: the tough, marauding, frontier woman. Put another way, Palin is something of a modern version of Annie Oakley."

He added, however, that "no one ever asked Oakley to sort out a Wall Street crisis or deal with Iran's nuclear ambitions."

And there's the rub. With McCain stumbling somewhat on the campaign trail, a seasoned backup would be invaluable.

As far as "fat resumes" are concerned, most financial analysts count the country as lucky to have Paulson and Bernacke, two strong and decisive veterans, at the helm during this crisis. The blame-game is postponed until future congressional hearings on how these same people might have headed off the meltdown.

Meanwhile, in key battleground states, life goes on.

Palin drew more than 30,000 Republican loyalists to a rally Sunday outside Orlando in an upscale retirement community. Some wore tee-shirts calling themselves "Sarah Palin's pit bulls." She proved yet again she can deliver sharper attack-dog messages than McCain—this time, against Democratic veep nominee Joe Biden's statement about how paying taxes is a measure of patriotism.

Obama also focused on Florida, hoping to overtake McCain's slight lead in this delegate-heavy state, where the latest Miami Herald poll shows McCain with a 2 point lead but with Obama’s leadership preferred on many underlying questions including managing the economy.

The Herald poll showed McCain's support after choosing Palin came mostly from white conservatives, not from crossover voters who favored Hillary Clinton in the Democratic primaries. The Hillary voters said they disliked Palin by a 57-16 margin.

Women with children at home divided narrowly, 47 to 46, for McCain but, overall, the Herald poll showed that Florida women favored Obama by 5 points; men favored McCain by 11 points.