Wall Street crisis refocuses U.S. election

By John Whitesides, Political Correspondent - Analysis

WASHINGTON (Reuters) - Put away the lipstick and the pig. After weeks of political games, Wall Street's historic meltdown refocused the White House race on the economy and gave Democrat Barack Obama an unexpected chance to regain his footing.

The financial upheaval quickly put Republican John McCain on the defensive -- he spent part of two days explaining his comment that the "fundamentals" of the economy were strong -- and switched the debate to an area where most opinion polls show Obama and Democrats are viewed more favorably.

But Obama has struggled all year to connect with working class voters, and the crisis on Wall Street could be the first-term Illinois senator's last and best chance to finally break through to voters on Main Street before the November 4 election.

"On the surface it should benefit Obama. But so far he hasn't always shown the ability to take advantage of these opportunities, particularly on the economy," said Andrew Taylor, a political scientist at North Carolina State University.

"This may be a bit of a turning point. It's a long campaign and there are ups and downs but we should see a little momentum from this for Obama," he said.

Voters overwhelmingly rank the economy as the campaign's top issue, but the last two weeks had been dominated by discussion of McCain's running mate, Alaska Gov. Sarah Palin, and side topics like the flap over whether Obama's "lipstick on a pig" comment was a sexist gibe or tired cliche.

The government rescue of insurance giant AIG, coming two days after the collapse of Lehman Brothers Holding and the sale of Merrill Lynch, quickly put the focus back on the economy.

The financial upheaval was another ominous reminder for voters of their mounting economic concerns, including high gas prices, rising interest rates and growing unemployment.

"This gives Obama a chance to jump on an issue that all year has been a good one for Democrats," said Steven Schier of Carleton College in Minnesota. "If he can't make hay out of this, he should just forget about it."

AGGRESSIVE RESPONSE

Obama and McCain responded aggressively to the crisis. McCain launched a sharp populist attack on Wall Street, and Obama laid the blame for the crisis on the Republican economic philosophy and policies of President George W. Bush.

Obama called the crisis "the final verdict on an economic philosophy that has completely failed" and pushed for a complete regulatory overhaul of the financial system.

McCain promised to end the "reckless conduct, corruption and unbridled greed" that he said caused the problems and also promised to enact and enforce reforms "to make sure that these outrages never happen in the first place."

But the stance by the Arizona senator and former chairman of the Senate Commerce Committee was undercut by a long history of opposition to government interference with market forces.

"McCain is walking an impossible, crooked line that requires him to be fairly inconsistent," said David Steinberg, a political communications expert at the University of Miami in Florida.