Sept. 17 (Bloomberg) -- John McCain and Barack Obama are both calling for tougher financial regulations as Wall Street faces its deepest crisis since the Depression. Yet Obama's record in this area is thin, and McCain has spent most of his quarter- century in Congress advocating deregulation.

A day after Lehman Brothers Holdings Inc. went bankrupt, McCain and Obama laid out plans to clamp down on financial markets by tightening oversight and enforcement, and modernizing the far-flung, 1930s-era regulatory structure.

While Democrat Obama, unlike Republican McCain, was calling for tougher regulations well before Lehman and Bear Stearns Cos. collapsed, neither candidate has led Senate committees overseeing finance, so their legislative achievements are limited.

``McCain is deregulatory, and Obama really doesn't have a track record,'' said Tom Gallagher, head of policy research at the International Strategy and Investment Group in Washington. ``You fall back to the stance of the two parties, and that more naturally favors the Democrats.''

Obama, speaking yesterday in Golden, Colorado, tied McCain to the policies of the last eight years. ``Senator McCain's approach was the same as the Bush administration's -- support ideological policies that made the crisis more likely, do nothing as the crisis hits and then scramble as the whole thing collapses,'' said Obama, 47, an Illinois senator.

McCain, 72, who calls himself a ``deregulator'' and argued in February for the need to ``keep government out of these issues and policies,'' is proposing new market supervision.

`Casual Oversight'

``Too many firms on Wall Street have been able to count on casual oversight by regulatory agencies and government,'' he said at an event in Tampa, Florida. ``Under my reforms, the American people will be protected by comprehensive regulations that will apply the rules and enforce them in full.''

The Arizona senator is proposing measures such as a ``safety and soundness regulator for every financial institution,'' according to Douglas Holtz-Eakin, a top economic adviser.

McCain has said financial regulators are too fractured and don't reflect the nature of today's industry, describing them as ``caught up in Washington turf wars.''

His campaign said McCain was ahead of the curve in warning about the risk presented by Fannie Mae and Freddie Mac, cosponsoring a bill in 2003 to create a new supervisor for the privately held, government-sponsored mortgage-lending giants that were seized by the federal government earlier this month.

`Disgraceful' CEO Pay

And he has criticized Wall Street chief executive officers as ``disgraceful'' for ``making off with tens of millions in severance.''

Last year, though, he opposed a measure passed by the U.S. House that would have allowed shareholders to hold nonbinding votes on executive pay.

McCain campaign spokesman Michael Goldfarb said yesterday that any ``legislative solution will quickly be circumvented'' by companies, so McCain ``has sought to use the bully pulpit to encourage shareholders to take control of the situation.''

Obama introduced a similar bill in the Senate that never came to a vote.

Carly Fiorina, another McCain economic adviser, said in a 2006 interview that government shouldn't interfere in executive compensation. ``I certainly don't think regulation is the way to go,'' she said. When Fiorina was ousted as CEO of Hewlett-Packard Co. in 2005 the company reported paying her a severance package of more than $21 million.

Deregulating Industry

In 1999, McCain supported comprehensive legislation deregulating the financial-services industry, including the repeal of the Glass-Steagall Act, which separated commercial and investment banking and was one of the hallmarks of President Franklin Roosevelt's New Deal economic program. While that allowed banks and securities firms to compete more directly, critics say it led to excesses because it wasn't replaced by a new law reflecting changes in financial markets.

McCain also supported a law that deregulated derivatives trading and exempted energy trading from oversight. And he backed a federal law that preempts state laws, some of which are stringent, against anti-predatory lending.

In recent years, McCain supported 2005 bankruptcy-overhaul legislation, an industry-backed bill that made it harder for some people to discharge their debt. Obama voted against it.

Obama has been in the Senate since just 2005, so he wasn't around for many of the pivotal debates over financial deregulation throughout the years.

He touts Senate legislation he introduced in 2006 to clamp down on fraudulent or risky mortgages as evidence that he pushed regulations aimed at preventing ``this turmoil from occurring in the first place.''

Power to Fed

In a March speech, he called for giving the Federal Reserve greater supervisory authority when it acts as a lender of last resort, strengthening the capital requirements for financial companies, and streamlining the collection of overlapping regulatory agencies that oversee Wall Street.

McCain spokesman Tucker Bounds said in a statement after Obama's speech that the Illinois senator is endorsing the ``failed liberal policies of the past.''

In the current environment, though, those policies are looking more appealing, even to McCain who also called for streamlining regulation and appointing a central oversight agency.

``If you're in favor of stronger regulation, you're likely to want to favor Mr. Obama,'' said Edwin Truman, a former assistant U.S. Treasury secretary.

To contact the reporters on this story: Alison Fitzgerald in Washington at Afitzgerald2@bloomberg.netChristopher Stern in Charlotte, North Carolina, at 1966 or cstern3@bloomberg.net

Last Updated: September 17, 2008 00:20 EDT