Image: Sen. John McCain, R-Ariz.
Stephan Savoia  /  AP
Presidential candidate Sen. John McCain, R-Ariz., seen having his picture taken with an assembly line worker, Wednesday, during a visit to a General Motors assembly plant in Lake Orion, Mich., says, "failed regulation, reckless management and a casino culture" on Wall Street forced the government to commit $85 billion to bail out AIG.
updated 9/17/2008 2:03:34 PM ET 2008-09-17T18:03:34

Republican John McCain was racing Wednesday to stay abreast of the turmoil in the U.S. economy, saying the $85 billion government bailout of the world's biggest insurance company — which he vigorously opposed just hours earlier — would protect millions of Americans from further financial hardship.

Democrat Barack Obama appeared to have regained his footing in the White House contest and was hitting McCain hard as a product of a Republican drive over the past few decades to deregulate the financial markets, moves that the first-term Illinois senator blamed for the ongoing meltdown in the U.S. economy.

The mounting crisis, Obama said, is "a stark reminder of the failures of crony capitalism and an economic philosophy that sees any regulation at all as unwise and unnecessary."

'Failed regulation, reckless management and a casino culture'
While McCain appeared to soften his opposition to the bailout proposed by the Treasury Department, re-calibrating his remarks about the lifeline tossed to American International Group Inc., he called for an investigation to uncover any wrongdoing.

"The government was forced to commit $85 billion," McCain said in a statement. "These actions stem from failed regulation, reckless management and a casino culture on Wall Street that has crippled one of the most important companies in America."

Obama sought advantage from the financial carnage, which most Americans believe is a product of the Bush administration, by purchasing an extraordinarily long 2 minutes of television time to air a lengthy commercial.

In it, Obama says: "600,000 Americans have lost their jobs since January. Paychecks are flat and home values are falling. It's hard to pay for gas and groceries and if you put it on a credit card they've probably raised your rates.

"You're paying more than ever for health insurance that covers less and less. This isn't just a string of bad luck. The truth is that while you've been living up to your responsibilities, Washington has not. That's why we need change. Real change."

While declaring there was no easy solution to the deep troubles facing the United States, Obama said he "approved this message because bitter, partisan fights and outworn ideas of the left and the right won't solve the problems we face today. But a new spirit of unity and shared responsibility will."

The end of the Palin bounce?
Neither candidate offered specifics about what kind of regulation they would bring to the crisis.

Even before the nightmarish financial news began flowing on Monday — as stock markets around the world plummeted on news that venerable bank Lehman Brothers was filing for bankruptcy — polls showed Americans were consumed with financial concerns above all other issues facing voters in this presidential election year.

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Video: Todd's First Read McCain, who had been riding a wave of enthusiasm over his choice of Alaska Gov. Sarah Palin as running mate, has stumbled and been forced back on the defensive by his muddled response to the bad economic news this week.

He joined Obama on Wednesday with two quickly produced new ads — one taped during a 10-minute stop at a home in Tampa, Florida, on Tuesday — to highlight McCain's efforts to reclaim the offensive on a subject he has acknowledged is a weakness.

"Enough is enough," says one commercial. "I'll meet this financial crisis head on. Reform Wall Street. New rules for fairness and honesty. I won't tolerate a system that puts you and your family at risk. Your savings, your jobs — I'll keep them safe."

McCain had stumbled badly on Monday when he said American economic fundamentals were in good shape. That was compounded when he declared on Tuesday that no more taxpayer money should be used to bail out private financial institutions such as AIG.

On Wednesday, McCain told ABC's "Good Morning America" that he hadn't wanted the bailout, but said millions of people whose finances were tied up in the company were in danger of having their lives destroyed and blamed Congress and federal regulators for not paying attention to the problem.

Situation 'muddled and unclear'
Asked for specific examples of corruption regarding AIG, senior McCain campaign adviser Steve Schmidt offered none.

Video: Cramer: 'We're all communists now!' "Well, at this hour, when you look at the situation, it is still muddled and unclear," Schmidt told The Associated Press. "But it is clear that the system has been corrupted, that there has been systemic failures, that the economy has been damaged by greed and avarice, and the broken institutions between Washington and New York have now conspired in a way that has put the American economy in crisis."

In a subsequent statement, the McCain campaign said: "The focus of any such action should be to protect the millions of Americans who hold insurance policies, retirement plans and other accounts with AIG. We must not bailout the management and speculators who created this mess.

McCain also has called for an economic crisis commissioncomparable to the one that investigated the Sept. 11, 2001, terrorist attacks, while Obama laughed that off as "the oldest Washington stunt in the book."

"This isn't 9/11," Obama told a crowd of more than 2,000 at the Colorado School of Mines, dismissing the idea of a need for study. "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."

McCain's calls for greater market regulation were running up against his record as a proponent of deregulation and playing into Obama's drive to link McCain with the deeply unpopular President George W. Bush.

After trailing Obama in the polls through much of the campaign leading up to both party's late-summer conventions, McCain had grabbed a 5-point lead in the Gallup Poll tracking survey as recently Thursday. Just days later the race had returned to a statistical tie.

The financial turmoil early this week ended sideshow debates that were consuming Obama and McCain, including distractions such as Obama's remarks about lipstick on pigs that the Republican campaign promoted as a sexist insult to Palin. At the Republican convention she had likened herself to a pit bull with lipstick.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Has the banking crisis shifted our focus?

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