McCain's financial fall guy; foresight or folly?

By Jeff Mason - Analysis

BLAINE, Minnesota (Reuters) - As the worst financial crisis since the Great Depression hit Wall Street and dominated the U.S. presidential campaign this week, White House hopeful John McCain looked for a fall guy.

He found one in Christopher Cox, a friend and fellow Republican who chairs the Securities and Exchange Commission.

"I would fire him," McCain declared on Thursday.

Problem solved? Not exactly.

After a week that started with McCain blundering by talking about the ailing economy's strong fundamentals, the Republican presidential candidate sought a target to blame for Wall Street's woes and outlined a plan he said would fix the system that caused the meltdown.

That does not mean his strategy was well received.

"He chose the wrong scapegoat," said James Cox, a professor of corporate and securities law at Duke University who is not related to the SEC chairman.

"It shows a profound ignorance of something (McCain) ought to know about being in Washington, and that is the limited regulatory authority of the SEC."

McCain's advisers acknowledged that many agencies shared the blame for the market turmoil but said the Arizona senator had targeted the SEC because of its failed regulatory role.

"The SEC did not do its job," said Steve Schmidt, the senior adviser who runs the McCain campaign's day-to-day operations.

"Chairman Cox, who Sen. McCain counts as a friend ... was at the helm of the ship. There was not effective oversight. They're the regulating agency and there must be accountability put back into our system of politics."

Market participants, already reeling from the week's events, were not impressed.

"I'm disappointed ... that both sides, whether its Republicans or Democrats, aren't saying 'let's try to fix this' first before we try to assess blame," said Andrew Busch, global foreign exchange strategist at BMO Capital Markets in Chicago.

"It's very frustrating for the financial market to hear this and then be subject to the volatility that ensues afterwards. I wish both candidates would understand that."

DISTANCE FROM BUSH