Ok, You Two, What Would You Do to Solve This Mess?

Barack Obama was in "governing mode," says one of his aides. In a small room next to A basketball arena at the University of Miami, Fla., the Democratic nominee had convened an emergency session of his new economic brain trust. It was a remarkable gathering for a candidate who, during the primaries, had relied largely on an obscure, baby-faced University of Chicago economist named Austan Goolsbee. With Obama in the room were Bob Rubin and Larry Summers, both Clinton-era Treasury secretaries credited with lifting global financial markets out of the "Asian contagion" of 1997; Paul Volcker, former chairman of the Federal Reserve; Laura Tyson, Clinton's Council of Economic Advisers chair; Gene Sperling, Clinton's national economic adviser; and Dan Tarullo, also a key Clinton go-to man on trade and G8 issues.

Piped in on a conference phone were legendary investor Warren Buffett, Nobel Prize-winning economist Joe Stiglitz and Obama's would-be veep, Joe Biden. The topic at hand: what to make of Treasury Secretary Hank Paulson's $700 billion rescue plan, which was to be announced later that day (Sept. 19). "There's a comfort level in having someone able to say, 'This is a little like what we faced 10 years ago'," says the aide, who would divulge details about the session only on condition of anonymity. "But Obama was running the show. Twice he cut some people off when they started to talk about what message he should deliver [to the public]. He said, 'Hold it, we'll do that later. You guys are here to help me figure out what we should be doing' " to solve the crisis.

In a phone call that day, Paulson had pleaded for time to sell his plan. Obama obliged by saying only that he supported giving Treasury and the Fed broad authority. Even though, behind closed doors, he was going into detail about his own possible solutions—mulling the virtues of the Depression-era Home Owners Loan Corporation and the response to the S&L crisis of the '80s—Obama supplied few specifics on his thinking. Nor has he revealed much more three weeks later, other than to talk about "protecting the taxpayer." While no one at the meeting would confirm they had advised the candidate to keep to generalities, Obama's approach did conform to the old Rubin-Summers philosophy from the '90s: loose talk by politicians just makes things worse, aggravating markets and upsetting negotiations. "The way McCain has made a fool of himself shows why," says another aide, who asked not to be named discussing campaign strategy. What the adviser didn't say is that this approach also gives Obama political cover: it allows him to avoid being too closely linked to a GOP-led bail-out while not appearing to undermine it.

John McCain's camp, of course, vehemently disputes this description of his response to the financial crisis. But there's no denying that the Republican candidate's reaction has been very different from Obama's. The day of the Paulson bailout plan, McCain avoided endorsing it, while blasting his Democratic rival for his ties to Fannie Mae and Freddie Mac. A few days later, McCain reversed course; he announced he was suspending his campaign to fly back to Washington to help pass the rescue bill, and he called for a postponement of the first presidential debate. Just as abruptly, McCain resumed campaigning—and showed up at the debate. At the second debate, on Oct. 7, McCain went beyond what Paulson, Fed chairman Ben Bernanke and Obama were saying, asserting that as president he would immediately begin spending $300 billion to directly buy up people's bad mortgages. "It's a dramatic step in terms of breadth and aggressiveness," says his chief economic adviser, Douglas Holtz-Eakin.

With the presidential election less than a month away, uncertainty about America's future leadership has likely contributed to the market turmoil. It hasn't helped that no one can know for sure how either McCain or Obama would respond if elected. Despite his efforts at an activist approach, McCain has continued to sink in the polls. Obama, on the other hand, seems to be following more the approach of Franklin Roosevelt in the campaign of 1932. The Democrat remained mostly silent on Herbert Hoover's response to the economic crisis until he took office and launched the New Deal. The latest survey numbers suggest Obama's approach is working better than McCain's: in the new NEWSWEEK Poll he has a nearly 20-point advantage as the candidate better able to handle the economy (54 to 35 percent).

While both men have now backed major government intervention, Obama and McCain are getting different kinds of economic advice. Since the crisis began, Obama has gotten close to the Clinton "A-team" that helped to reassure markets in the '90s—Summers, Rubin and Tyson now routinely travel with him—whereas McCain continues to take the looser approach he's used as senator. McCain conducts occasional phone conferences with anywhere from seven to 30 business people and economists who review his campaign material; otherwise, the senator funnels their advice through Holtz-Eakin, a former staff member of Bush's Council of Economic Advisers and later director of the Congressional Budget Office. "I'm the chief bureaucrat," says Holtz-Eakin. "We've got lots of people out there. He likes to just listen to the various points of view … He really does operate in a style reminiscent of his time as chairman of the commerce committee." Many of McCain's advisers are Fortune 500 CEOs like Meg Whitman of eBay—he named her at the second debate as a possible Treasury secretary—rather than denizens of Wall Street or Washington (though he does speak with John Thain of Merrill Lynch regularly). McCain's chief financial-market expert, former Treasury undersecretary John Taylor, is regarded in the economic community as a brilliant thinker and analyst but a less-than-effective administrator. (The McCain campaign declined to comment.) Jack Kemp, chiefly known as a passionate advocate of tax cuts, also travels with McCain, says Holtz-Eakin.

McCain's wide-net approach to the financial crisis may reflect the lack of a dominant voice on his team since he parted with his closest adviser, Phil Gramm. The former Texas senator, a champion of financial deregulation, left the campaign during the summer after he decried Americans as a "nation of whiners," embarrassing McCain. But McCain has relied on no one as much since. "Everything that John learned before the campaign about economics he learned from Phil Gramm," says a former longtime McCain adviser who would talk about the candidate's positions only on condition of anonymity. "Senator McCain seeks advice from a broad and diverse group of people," says a senior McCain adviser, who requested anonymity in disputing about these characterizations.

Despite his experience chairing the Senate commerce committee, McCain has never had a particularly comfortable relationship with Wall Street, says a Republican fund-raiser who works in the financial industry and asked for anonymity in discussing politics. At one Wall Street fund-raiser, the candidate seemed so stilted and awkward in talking about finance it was like he was "going to visit the dentist," says the GOP fund-raiser. The senior McCain adviser tells NEWSWEEK that the senator "has been in Congress for over two decades and he is obviously well versed on issues relating to the American economy. His wife also owns a successful business, so he has that perspective as well." The adviser adds: "Obama is fond of pointing out the presence of Rubin and Summers on his team, but … their sole contribution to the debate was to wait and see what the administration came up with."

For Obama's part, his aides say that his adoption of the core Clinton economics team doesn't mean a return to Clintonomics. Officials who led the former president's deficit-cutting efforts in 1993 say this is a different environment: Summers, for one, has publicly counseled deficit spending to get the economy healthy again. And as the crisis has spiraled further out of control, Obama has been forced to step up and offer more specifics. He has also made a personal visit to see Bernanke (McCain has not, though he has talked to him on the phone). Recently Obama proposed a "stability fee" that Wall Street's bailed-out firms should pay back to the government and a plan to help small businesses by extending a tax credit. Like McCain, says one of the Obama aides, Obama knows that if he's elected he's "going to have to hit the ground running on Jan. 20." Ground that, it seems, is ever shifting.