McCain, Obama Both Oppose Bailout Of AIG Management

September 17, 2008 12:07 p.m. EST

Washington, D.C. (AHN) - Despite criticisms that he previously opposed "government interference," Sen. John McCain (R-AZ) called for "effective regulation" of Wall Street on Wednesday. Sen. Barack Obama (D-IL) said AIG's bailout was the "final verdict" on the economic strategy supported by McCain.

In an emailed statement, McCain said the Federal Reserve's take over of American International Group was the result of "failed regulation, reckless management, and a casino culture on Wall Street." He added, "the focus of any such action should be to protect the millions of Americans who hold insurance policies, retirement plans and other accounts with AIG," and that no bailout should be given to company management. The Arizona senator called for "strong and effective regulation," saying the "ethics and the social contract between businesses and America" should be restored. He added that the government should impose penalties if AIG executives misled investors and regulators.

Obama agreed with McCain that the Federal Reserve must not bail out AIG executives but said his rival had supported an economic policy that "works for the special interests... and hope[s] that prosperity trickles down to the rest" for 26 years.

"This crisis serves as a stark reminder of the failures of crony capitalism and an economic philosophy that sees any regulation at all as unwise and unnecessary," the Democratic candidate said. "It is time for a new economic strategy, guided by the principle that America prospers when all Americans prosper, where common-sense rules of the road ensure that competition is fair, open, and honest." The Federal Reserve announced on Tuesday it would provide AIG, the nation's biggest insurer, a two-year $85 billion loan in return for a 79.9 percent stake in the company. The decision came a day after Lehman Brothers, the nation's fourth largest investment firm, filed for bankruptcy and Merrill Lynch agreed to sell itself to Bank of America for $50 billion. The Federal Reserve bailed out the nation's biggest mortgage companies, Fannie Mae and Freddie, last month.