Wall Street woes

Six months after the collapse of Bear Stearns, Wall Street and Capitol Hill were rattled late Sunday with the downfall of Lehman Brothers and the takeover of Merrill Lynch.

The presidential candidates quickly waded in, with Sen. Barack Obama (D-Ill.) calling the turmoil in the financial markets “a major threat to our economy” and a crisis unparalleled since the Great Depression.

Sen. John McCain (R-Ariz.) said policymakers need to revamp “the outdated and ineffective patchwork quilt of regulatory oversight in Washington.”

Others were more circumspect, opting to let the markets digest the bad news before making big policy announcements.

There was no shortage of political finger-pointing.

The Republican National Committee issued a release that stated, “As we face challenging economic times, Obama wants to raise taxes.”

Sen. Carl Levin (D-Mich.) said, “I think the chickens are coming home to roost on the Bush economic policies, but that doesn’t answer where we go from here.”

No, it doesn’t.

While it is not surprising that politicians are playing politics on economic issues with less than two months before the election, restraint is key. There will be plenty of time to assess blame later.

This is no ordinary dip in the markets, and financial experts are predicting that the economy has not yet bottomed out. For now, there is little light at the end of the tunnel and a great need for lawmakers and the administration to deal with this crisis.

For much of the 110th Congress, there has been a disconnect between Wall Street and Capitol Hill, with the investment industry more in tune with the state of the souring economy than legislators.

That changed somewhat earlier this year when Congress and President Bush ironed out a deal to stimulate the economy.

Democrats are now pushing another economic stimulus, estimated to cost $50 billion. Whether that bill passes is unclear, but there is little time left on the congressional schedule.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have worked well with congressional leaders and committee chairmen. Those relationships will be tested in coming weeks.

In reacting to the dire news on Monday, Financial Services ranking Republican Spencer Bachus (Ala.) said, “This is not the time for fault-finding or recrimination. At this time, we all need to work together to restore stability to the markets and to support our economy.”

Well said.