MINNEAPOLIS — Sen. John McCain is the better choice for the banking industry not for what he would do as president, but rather for what he would refrain from doing, GOP lawmakers said here this week during the Republican National Convention.
Several legislators contrasted the Arizona Republican's generally hands-off approach to market volatility with what they expect would be a hefty list of reforms that could hurt banks and other financial companies if Sen. Barack Obama won the election.
"Obama starts with a preconception that the government can solve all problems, and McCain starts with a view that the government should be a place of last resort," said House Minority Whip Roy Blunt of Missouri. "Only when the marketplace fails to work should the government step in an aggressive way, and that's a big difference. All of the Obama pledges the other night were about how to spend money, not how to make money."
Democrats interviewed last week in Denver cited specific goals they said an Obama administration would advocate, including credit card, underwriting, and bankruptcy reform, but this week Republicans touted Sen. McCain, who is scheduled to accept his party's nomination today, for not being an interventionist.
"Sen. McCain, if you go back and look at his record, has been much more market-based in his policy. He believes in the market, letting the markets do what they do best," said Rep. Randy Neugebauer of Texas, a member of the House Financial Services Committee.
"He has not been a proponent of a lot of regulation over the years, so I would sense that his administration would be one that would say, 'We want to make sure there is transparency. We would want to make sure that the markets are behaving appropriately and not with any manipulation going on,' but I think he's going to be one that says, 'Let's let the markets run their course."
Many Republicans argued that Sen. Obama's approach could hurt the economy.
"The free market concept would go away" under his administration, said Rep. Kevin McCarthy of California, another Financial Services Committee member. "We'd see a great deal of regulation in the process, and my fear overall from that standpoint would be a lack of capital in an economic time where we need capital, so that people can create wealth. If you take capital out of the market, you will shrink the economy."
For example, Rep. McCarthy said he thought cracking down on credit card practices — an area where Sen. Obama and the Democrats have expressed interest — could impede access to credit.
"When you look at the credit card situation, I think that would injure a lot of individuals," he said.
Sen. Robert Bennett, a Banking Committee member, said Republicans in general are easier on the industry, but he was vague on Sen. McCain's banking policies.
"I'm not sure either one" of the presidential candidates "has focused on financial services as an industry," the Utah lawmaker said. "Republicans are more generally interested in and friendly to the industry than are Democrats."
He also said the country's competitive standing would be better under Sen. McCain.
"Obama's comments about protectionism have focused mainly on the sale of goods rather than services overseas, and some of the attitudes that he has demonstrated in his campaign thus far could be troubling with respect to America's ability to compete worldwide in the financial services sector," Sen. Bennett said.
Even if they were short on specifics, Republicans said they trust Sen. McCain's judgment.
"The economic policies Sen. McCain has always championed, in terms of things like no earmarks and more transparency, will translate to all phases of the financial services industry," said Rep. Shelley Moore Capito, the senior Republican on the House Financial Services housing subcommittee. "Sen. Obama is just more unpredictable. I don't know where he would take it, honestly, because I haven't heard him talk about it. I think Sen. McCain would make rational and very well-thought-out decisions."
Some House Republicans are also hoping a McCain administration would break with some Bush administration policies, particularly its pledge to backstop the government-sponsored enterprises.
"We are starting to establish a systemic risk list out there where you don't need a triple-A rating. You just need to get on the Treasury secretary's systemic risk list," Rep. Neugebauer said. "What they are saying is if you get on that list, you don't need to worry, because we aren't going to let you fail. I don't think that's the appropriate role for the government to be playing."
Rep. Blunt said the recently enacted housing bill was a mistake, because it "didn't create a clear path of what happens if the government has to step in in an aggressive way."
Some of his concerns "in voting against the bill are proving to be exactly the concerns that we should have dealt with at the time, which is the question: What happens if we have to step in?" he said. "There is no reason that legislation couldn't have specified what happens if we had to step in."
(Neither Sen. McCain nor Sen. Obama were present to vote for the housing package, which was enacted in July, but both said they supported the legislation.)
But Sen. McCain's banking policies are clearly not at the forefront of lawmakers' minds. The convention has already been dampened by fears that Hurricane Gustav could turn into a rerun of Hurricane Katrina in 2005.
Also, many incumbent Republicans are facing tough re-election races. Rep. Michael Castle of Delaware, a Financial Services Committee member, said he is worried about how many might lose their seats.
"I am concerned just based on the numbers, before you get into the mood of the electorate," he said. "There are a number of Republicans who retired or who have difficult seats both in the House and in the Senate, versus Democrats who are seen to favor gaining seats in the House and in the Senate."
Rep. Castle also acknowledged concerns that last week's Democratic National Convention was able to draw so much excitement.
"I think the Obama fantasy has just been built around an aura of excitement," he said.
"He's very articulate. The Democrats haven't been in office for eight years, so they are enthused with trying to move forward on that track, and I sense that excitement."
But Rep. Neugebauer said: "This election is not about who had the best convention. It's about who has the best team and who's going to do the right thing."
Rep. Castle did not draw many distinctions between Sen. McCain or Sen. Obama on financial services, but he said Congress would likely lead the way on those issues.
"Financial services are to a degree dictated a little bit more by the Congress than some other issues, particularly like foreign policy," he said. "I would hope that both would have an understanding of the significance of the financial industry being the backbone of economic development and opportunity, and the fact that we need a good regulatory process."
