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Presidential Contenders Call for Financial Industry Regulation

Sens. John McCain and Barack Obama promised tighter government regulation of Wall Street Tuesday as they struggled to address the country's economic woes from the campaign trail. Campaign advisers debate the candidates' proposals to regulate the investment industry.

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  • JUDY WOODRUFF:

    The tremors on Wall Street have also sent shockwaves through the race for the White House, with both nominees hitting the trail today to advocate more effective government regulation of financial markets.

    John McCain spoke this afternoon in Tampa.

    SEN. JOHN MCCAIN (R), Arizona: Too many firms on Wall Street have been able to count on casual oversight by regulatory agencies in government. And there's so many of these regulators that the responsibility for oversight is scattered, unfocused, and ineffective.

    We don't need a dozen federal agencies doing the job badly. We need the best federal agencies to do the job right.

    Under my reforms, the American people will be protected by comprehensive regulations that will apply the rules and enforce them to the full. There will be constant access to the books and accounts of our banks and other financial institutions. By law, it will reduce the debt and risk that any bank can take on.

    And above all, I promise reforms to prevent the kind of wild speculation that could put our markets at risk and has already inflicted such enormous damage across our economy.

  • JUDY WOODRUFF:

    Earlier, McCain made the morning show rounds and called for a commission, like the one created after 9/11.

  • SEN. JOHN MCCAIN:

    We're going to fix and make sure that every American who has a deposit in a bank, that they are — that their deposit insured. We're going to need a 9/11 Commission to find out what happened and what needs to be fixed.

  • JUDY WOODRUFF:

    In Golden, Colorado, Barack Obama said that idea showed a lack of understanding on McCain's part.

    SEN. BARACK OBAMA (D), Illinois: This morning, instead of offering up concrete plans to solve these issues, Senator McCain offered up the oldest Washington stunt in the book. You pass the buck to a commission to study the problem.

  • Here’s the thing:

    This isn't 9/11. We know how we got into this mess. What we need now is leadership that gets us out. I'll provide it; John McCain won't. And that's the choice for Americans in this election.

  • JUDY WOODRUFF:

    Instead, Obama said what's needed are regulations that match the economic conditions of the day.

  • SEN. BARACK OBAMA:

    The American economy does not stand still, and neither should the rules that govern it. The evolution…

    The evolution of industries and new financial instruments often warrants regulatory reform to foster competition and lower prices or to replace outdated oversight structures.

    Old institutions cannot adequately oversee new practices. Old rules may not fit the roads where our economy is leading.

    But instead of sensible reform that rewarded success and freed the creative forces of the market, too often we've excused an ethic of greed, corner-cutting, and inside-dealing that threatens the long-term stability of our economic system.

  • JUDY WOODRUFF:

    This is not the first time talk of financial regulation has surfaced in the campaign. In March of 2007, Obama wrote a letter to Federal Reserve Chairman Ben Bernanke and Treasury Secretary Paulson urging them to convene a summit of mortgage lenders, federal regulators, and government agencies to address the impending home foreclosure crisis.

    By contrast, McCain has been more reluctant to embrace government intervention. In an interview with the Wall Street Journal in March of this year, McCain said, "I'm always for less regulation, but I am aware of the view that there is a need for government oversight."

    Just weeks later, after the collapse of Bear Stearns, McCain indicated he would back some level of government help to shore up the housing market.

  • SEN. JOHN MCCAIN:

    I've always been committed to the principle that it's not the duty of government to bail out and reward those who act irresponsibly, whether they're big banks or small borrowers.

    Government assistance to the banking system should be based on solely preventing systemic risk that would endanger the entire financial system and the economy. In our effort to help deserving homeowners, no assistance should be given to speculators.

  • JUDY WOODRUFF:

    That same week, Barack Obama laid out his plans for overhauling financial regulation and argued that government oversight and free markets should not be at odds.

  • SEN. BARACK OBAMA:

    Our history should give us confidence that we don't have to choose between an oppressive government-run economy and a chaotic, unforgiving capitalism. It tells us we can emerge from great economic upheavals stronger, not weaker.

    But we can only do so if we restore confidence in our markets, only if we rebuild trust between investors and lenders, and only if we renew that common interest between Wall Street and Main Street that is the key to our long-term success.

  • JUDY WOODRUFF:

    What's clear is that both nominees will continue to be asked about regulatory solutions, as many Americans increasingly look to the government for answers to the financial crisis.

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