Beyond lipstick on pigs

There’s nothing like the worst financial crisis since the Great Depression to knock pigs with lipstick off the front page.

Suddenly, in the wake of the meltdown on Wall Street, real-world urgency has moved front and center in the presidential race. It’s a big price to pay to get the media’s focus off the phony outrage and ginned-up character controversies—not to mention the new eruption of the culture wars—that were distracting voters from the truly important issues facing the country.

This is clearly Barack Obama’s opportunity to wrest back control of the contest. Democrats always have an advantage over Republicans when it comes to credibility on economic crises, especially when they’re fostered by a lack of regulation and an excess of corporate greed.

Make no mistake about it: This crisis was caused by a greed-fueled blindness to the fundamental unsoundness of widespread mortgage-bundling practices. It’s astonishing that supposedly smart people making millions of dollars a year didn’t see the gaping hole in the system—that because the commercial banks and mortgage companies doing the initial lending could then package and sell the loans to investors, they had no incentive to make sure borrowers actually could afford their payments. Well, duh.

As much as John McCain may try to convince voters that he’s a maverick and reformer—not so easy to do when your own party has been in power for the past eight years—when it comes to Wall Street he has no record of calling for tighter controls on investment firms.

Obama, in contrast, was prescient when, in March 2007, he warned of the coming housing crisis. A year later, responding to the collapse of the Bear Stearns investment company, he made a speech outlining six principles for overhauling financial regulation. Among other things, he called for regulating mortgage brokers, investment banks and hedge funds in much the way commercial banks are regulated.

McCain, too, has called for increased oversight—but only this week, as the crisis unfolded. Six months ago, in March, he told The Wall Street Journal that he was “always for less regulation” and “fundamentally a deregulator.” He is a true believer in the anti-regulatory Republican ideology, which has allowed the excesses that have led to this disaster. Obama, in contrast, seems to understand that unfettered capitalism run by the wealthy few has a self-destructive bent that can have painful consequences for everyone else.