Now that the central issue of the campaign is the economy, Barack Obama has the momentum and is rising in the polls on the strength of his clear economic message and attacks on John McCain for his lobbyist-run campaign. McCain and his campaign haven't helped out by offering a series of gaffes, and their credibility among the MSM is at a low thanks to the continued focus on their lies.
McCain is trying to turn things around with a flurry of advertisements -- three last night and another new Web ad today -- connecting Obama to Fannie Mae and Freddie Mac, and attacking his economic plan. It looks desperate. At Time, they are wondering if one of the ads plays the race card. Obama is denying the substance of one of the ads -- that a former Fannie Mae official advised his campaign on mortgage policy. Another is just a guilt-by-association ploy against an adviser who worked for Obama for a few days before resigning.
We'll see how the ads do, but the big narrative the McCain campaign is now trying to drive, as evinced by a speech this morning, is that now-bailed-out Fannie Mae and Freddie Mac caused the crisis while Obama stood by and McCain proposed reform. Unfortunately, that narrative is false. Those two institutions held no sub-prime mortgages (although they held some better-than-sub-prime-but-still-not-very-good loans) until the Bush administration and Congress had them start buying sub-prime in late 2007/early 2008 in an attempt to stem the crisis.
The real problem with the system, as dicussed in Bob Kuttner's piece on the crisis, was the ability of investment groups to create financial instruments that were extremely risky and then bet heavily on them with borrowed money, all while receiving bad information from conflict-of-interest-driven ratings firms. Fannie Mae and Freddie Mac were sent in to pick up the pieces (essentially a small-scale version of what the Treasury and the Federal Reserve are proposing this morning) and got swamped by the tidal wave.
The McCain camp is worried that the economy will drive them from the race, but if they want to make a stand they need to come up with a systemic fix and a more credible narrative -- especially if CW driver First Read is responding so negatively to their offensive.
--Tim Fernholz
