Republican Presidential Candidate John McCain's solution is focused on the immediate banking crisis, just as the candidate himself is quick to make decisions. However, it doesn't address the root causes of the problem. In fact, it is also very similar to the proposal put forth by U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.
McCain proposes a Mortgage and Financial Institutions Trust (MFI) that would identify and purchase bad loans to resell later at a profit when the market has improved. The government would take a controlling stake in the companies it helped, and all profits would go to the Treasury. This is also what would happen under the current bailout proposal.
He recently proposed limiting the ability of Fannie Mae and Freddie Mac to borrow so that they are no longer a threat to the economy. He would then privatize and eliminate their link to the government. However, making these agencies smaller would also have the effect of limiting the amount of mortgages that were available to homeowners. That's because the two are responsible for buying and reselling 50 - 90% of the mortgages in the U.S.
Democratic Presidential Candidate Barack Obama's plan is more encompassing, and would prevent further crises, which reflects the candidate's analytical and measured leadership style. However, while it does address the causes of the crisis, it doesn't really resolve the immediate banking panic.
Obama's proposal would streamline regulatory agencies, especially those that to oversee banks that borrow from the government, establish a financial market advisory group, improve transparency for financial disclosure, and crack down on trading activities that could manipulate markets. He would also prohibit government aides from working on issues related to a former employer for two years and prevent them from lobbying after they leave. He would put meetings between governmental agencies and lobbyists on the web for public viewing.
