McCain's Trip to Washington Proves Risky for Campaign (Update2)

By Edwin Chen and Julianna Goldman

Sept. 26 (Bloomberg) -- John McCain's high-stakes bet that his return to Washington could help solve the nation's financial crisis ended up complicating both his presidential campaign and a government bailout agreement.

After a 4 p.m. meeting yesterday at the White House with President George W. Bush, Democratic nominee Barack Obama, Cabinet officials and congressional leaders, several lawmakers said the negotiations had regressed. Democrats blamed McCain for slowing what they said had been a day of progress.

``Instead of being a rescue plan for our economy it was a rescue plan for John McCain,'' said Senator Christopher Dodd, a Connecticut Democrat and chairman of the Senate Banking Committee. ``This was theater for the last 2 1/2 hours.''

Talks over the administration's $700 billion financial- rescue plan were put in jeopardy last night after congressional Republicans split over the proposal. Some Republicans led by Representative Eric Cantor said they wouldn't back the plan, which calls for the government to buy troubled assets from financial firms.

They offered an alternative, in which Wall Street companies would purchase insurance on mortgage-backed securities. It also advocates tax cuts and relaxed regulations.

House Republicans said today they are rejoining the talks as leaders of both parties vowed to keep Congress in session until a deal is reached.

`My Country First'

Obama said he thought more progress had been made before he and McCain arrived in Washington yesterday. ``When you start injecting presidential politics into delicate negotiations, you create more problems,'' he said in a CNN interview.

McCain declined to characterize his impact so far. In an interview yesterday with NBC, he said, ``I don't know how it's `played.' I have a record of putting my country first.''

A senior McCain campaign official said the Arizona senator inserted himself into the talks because he had doubts about the way the Bush administration was handling the matter.

``That we were facing what could be the worst financial disaster since the Great Depression became apparent weeks ago - -even as the White House was reassuring everyone they were on top of the situation,'' said the official, who asked to remain unidentified.

The candidates will meet tonight at the University of Mississippi for the first of three scheduled presidential debates. McCain said this morning he would participate after earlier this week calling on Obama to postpone the event until Congress hammers out a plan to resolve the crisis.

Quelling the Uprising

McCain now has a battle on three fronts, and only one of them involves Obama: He opposes many aspects of the administration's bailout plan. And he's working to quell an uprising among Republican conservatives in the House.

The campaign official said McCain was told that House Republicans weren't supporting the administration plan, offered by Treasury Secretary Henry Paulson, and that he had to step in to try to fashion a compromise to win them over. Then, the official said, McCain felt he had to respond to the call from Senate Majority Leader Harry Reid, a Nevada Democrat, that Paulson's plan would rise or fall based on McCain's support.

Reid said today McCain's decision to return to Washington from the campaign trail contributed to derailing the agreement that he said had been reached yesterday afternoon.

``The insertion of presidential politics has not been helpful, it's been harmful,'' he told reporters in Washington.

Other lawmakers criticized the Republican nominee.

`Mighty Mouse'

``McCain as Andy Kaufman in his Mighty Mouse costume -- `Here I've come to save the day' -- is not helpful,'' said Representative Barney Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee who was one of the architects of the tentative agreement.

McCain may win over the long term if a consensus develops that the rescue package is too generous to Wall Street at the expense of homeowners and taxpayers. The unrest was underlined by the Cantor-led group of insurgent Republican lawmakers.

``McCain does not want to be on the wrong side of public opinion on this one,'' said Stephen Wayne, a government professor at Georgetown University in Washington. ``He wants to wait and see and survive. It is very dicey for Republican candidates at the moment. Whoever thought their October surprise would come in September?''

Polls show a majority of Americans assign more blame to Republicans, particularly Bush, than to Democrats, for the financial mess. They also show that voters believe Obama would be better at dealing with economic trouble.

Reinforcing the `Maverick'

``McCain's move was designed to address both those points,'' said Karlyn Bowman, a polling expert at the American Enterprise Institute in Washington. ``It also reinforces his maverick status. It is always good to unsettle the other side.''

Obama's campaign said the Illinois Democrat has remained attuned to the details of the congressional negotiations with the administration, frequently talking to Paulson and staying in sometimes hourly contact with leaders on Capitol Hill.

``Senator Obama has had very detailed technical discussions with Secretary Paulson because he's very concerned that for the legislation to succeed we have to get those details right,'' said Jason Furman, economic-policy director for the campaign.

To contact the reporters on this story: Edwin Chen in Washington at Echen32@bloomberg.net ; Julianna Goldman in Washington at jgoldman6@bloomberg.net

Last Updated: September 26, 2008 16:37 EDT

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