Image: Sen. John McCain, R-Ariz.
MANDEL NGAN  /  AFP/Getty Images
In spite of the recent bailouts of financial firms, presidential candidate Sen. John McCain, R-Ariz., says he doesn't regret supporting a 1999 law that removed barriers between investment banks and commercial banks.
updated 9/22/2008 7:44:20 AM ET 2008-09-22T11:44:20

Sen. John McCain defended deregulation on Wall Street even as he endorsed a $700 billion bailout of financial firms in an interview broadcast Sunday.

His opponent in the presidential race, Democratic Sen. Barack Obama, said an inadequate regulatory system was partly responsible for the crisis. Both candidates were interviewed on CBS' "60 Minutes."

McCain, the Republican presidential nominee, has long supported fewer regulations for businesses. But as the financial crisis on Wall Street worsens, McCain is calling for more government oversight. Obama said McCain is late in calling for better oversight after years of supporting fewer regulations.

McCain was asked if he regretted supporting a 1999 law that removed barriers between investment banks and commercial banks that were erected in 1933, in response to the 1929 stock market crash.

"No," McCain said. "I think the deregulation was probably helpful to the growth of our economy."

Defending Bush's proposal
In the same interview, McCain defended the Bush administration's proposed bailout of financial firms as necessary, though he acknowledged it could get expensive.

"We're going to take over these bad loans," McCain said. "And we're going to have the taxpayer help you out. But when the time comes and the economy recovers, then anything that's gained back is going to go to the taxpayers first.

"I'm not saying this isn't going to be messy. And I'm not saying it isn't going to be expensive. But we have to stop the bleeding," McCain said.

Last week, McCain called for the firing of Securities and Exchange Commission Chairman Christopher Cox. In the CBS interview, which was taped Thursday, McCain said he would consider New York Attorney General Andrew Cuomo, a Democrat, as a replacement for Cox.

Video: Pa. polls show tight race "I think he is somebody who could restore some credibility, lend some bipartisanship, to this effort," McCain said.

The administration proposal would be the biggest government intervention since the Great Depression. It would dole out huge sums of money to financial firms to purchase their holdings of bad mortgage-backed securities so that these firms can resume normal lending operations.

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In a separate interview on "60 Minutes," Obama said, "There were a lot of factors involved" in the crisis. "But I think there is no doubt that if we had had a regulatory system that had kept pace with the changes in the financial system, that would have had an enormous impact in containing some of the problems that are out there."

McCain's credentials challenged
Obama also challenged McCain's credentials on increasing government oversight.

"I think that I've got a track record of actually believing in this stuff," Obama said. "And, you know, Senator McCain, fairly recently, said, 'I'm a deregulator.'"

Obama also pointed out former Sen. Phil Gramm, one of McCain's economic advisers, was a chief sponsor of the 1999 bill that removed restrictions on investment and commercial banks. The law, which repealed the Glass-Steagall Act, was also supported by President Clinton.

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

Video: McCain: ‘I believe in regulation’

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