NEWS ANALYSIS - Credit crisis a GOP worry - Public pessimism about the economy may fuel the Democrats' push to adopt new financial regulations.
WASHINGTON — The credit crisis that has hit home mortgages and shaken worldwide financial markets is turning into a political albatross for President Bush and Republican presidential contenders, piling atop an unpopular war in Iraq and eroding traditional GOP claims of being good stewards of the economy.
And it may be having a more far-reaching effect as well: giving Democrats a powerful argument for passing new financial regulations that the administration desperately wants to avoid.
Democrats say the nation's system of financial safeguards, many of them designed in response to the Great Depression of the 1930s, is inadequate for today's highly deregulated, global economy. Until now, Bush and congressional Republicans had little difficulty deflecting such calls for change.
But the credit upheaval and the shock waves it sent throughout the economy have changed the political climate. In the most recent Gallup poll, taken last week, 72% of Americans said the economy was "getting worse." That was the most pessimistic showing since Gallup began asking the question in the early 1990s and comparable only to the 71% recorded in January 1992, when unhappiness with the economy was credited with helping Bill Clinton win the presidency later that year.
"Even if this doesn't lead to serious instability and a slowdown of the economy, [the credit crisis] reinforces the insecurity, from higher energy prices, higher healthcare costs and pension worries to set a very unfavorable economic environment for the president's party," said Thomas E. Mann, a presidential scholar at the Brookings Institution in Washington.
And Democrats demonstrated Tuesday that they intended to take full advantage of the Republicans' plight.
In the House, Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, announced plans for a Sept. 5 hearing on the credit crisis and ticked off an ambitious legislative agenda to address the problems, including expanding the roles of government-sponsored mortgage loan facilitators, Fannie Mae and Freddie Mac, and imposing new rules on companies that issue mortgages and those that package them for sale as securities.
"The financial markets have outgrown the current regulatory system, and we need to do something about it," Frank said.
