Which candidate benefits from new housing flap?

WASHINGTON (Reuters) - Which presidential candidate stands to gain from the new uproar in the U.S. housing market -- Democrat Barack Obama or Republican John McCain?

At first blush, Obama would seem better positioned to reap the benefits from the emerging crisis surrounding Freddie Mac and Fannie Mae, two institutions with fanciful names that are flirting with collapse.

But there is also a case to be made that the more experienced McCain could better guide the reforms that experts say are needed to bolster two companies that combine hold $5 trillion in mortgages.

First, the Obama scenario:

Conventional thinking is that a sagging economy in a presidential election year favors a candidate running against the party in control of the White House.

Example: A savings and loan crisis in 1990 contributed to a picture of an economy on the ropes, and incumbent President George H.W. Bush lost his 1992 re-election bid to Democrat Bill Clinton.

"In the broader picture, anything that is bad news for the economy is bad news for McCain, and this is bad news," said William Galston, a former Clinton White House domestic policy aide.

With the November 4 election still almost four months away, opinion polls show Americans believe Obama is better prepared to deal with the economy and are clamoring for change.

"NATION OF WHINERS"

Helping Obama's argument that McCain is out of touch on the economy were comments from McCain economic adviser and former Texas Sen. Phil Gramm, who said Americans are in a "mental recession" and are a "nation of whiners."

Obama has already been calling McCain to task for saying last December that "the issue of economics is not something I've understood as well as I should."

"It took Sen. McCain three different tries to figure out a real response to the housing crisis, and his current plan does nothing to help more than two million homeowners who are facing foreclosure," said Obama spokesman Bill Burton.

There is a flip side to the argument that Obama benefits the most from the nation's profound housing crisis, and that is the experience question. Is Obama, a first-term senator from Illinois, sufficiently experienced to deal with this mess?

"McCain is flat-out more experienced in government. Obama is a neophyte. He's good at running campaigns. That's about all," said Peter Morici, economics professor at the University of Maryland.

Legislation that would reform how Freddie Mac and Fannie Mae do business has been bottled up in the U.S. Congress, to the great frustration of the Bush administration. The two companies are known as GSEs, which is Washington-speak for government-sponsored enterprises.

BAILOUT?

Both Obama and McCain have largely offered the same policy on Freddie Mac and Fannie Mae, that they must not be allowed to fail. Obama has not commented on whether they should be bailed out by the federal government, while McCain said on Friday he would support "effective action" to keep them from going under.

"The candidate who benefits from this crisis will be the one who has the most compelling plan and can explain that plan most clearly to the voters for turning the financial crisis around," said Republican pollster Whit Ayres.

Democrats look for inspiration to Franklin Roosevelt, the Democratic president who helped lead the country out of the Depression in the 1930s.

But Morici wondered whether Obama would be any more capable at coercing fellow Democrats into making changes to two organizations that have long associations with the Democratic Party.

Fannie Mae in particular has strong connections to Democratic politics. Franklin Raines, who stepped down as chief executive in 2004 in the middle of an accounting controversy, went from a senior role at the firm in the 1990s to become Clinton's budget director before returning to the company as

CEO.

Former Fannie Mae CEO James Johnson headed John Kerry's vice presidential search team, and was doing the same job for Obama but left the post after reports he received favorable mortgage interest rates as a result of his ties to the chief executive of the troubled mortgage lender Countrywide Financial.

Jamie Gorelick, who was a deputy attorney general for Clinton, was also a top executive at Fannie Mae.

(Additional reporting by Mark Felsenthal; Editing by Philip Barbara)

(To read more about the U.S. political campaign, visit Reuters "Tales from the Trail: 2008" online at blogs.reuters.com/trail08/)