CNBC's Harwood: Banking Crisis Helps Democrats

     It may not seem like a U.S. banking crisis could produce many winners, but it has according to CNBC.

    Washington correspondent John Harwood appeared on CNBC’s “Squawk Box” September 15 – the day Lehman Brothers (NYSE:LEH) failed and Merrill Lynch (NYSE:MER) was sold to Bank of America (NYSE:BAC). Harwood was on the show to discuss how the banking crisis impacted the current political climate in the midst of a presidential campaign.

     “It’s potentially a big moment Becky,” Harwood said to Becky Quick, co-anchor of “Squawk Box.” “You remember during the primaries Hillary Clinton ran that ad about the 3 a.m. phone call against Barack Obama. One of her former aids said this morning, ‘It’s 3 a.m. on Wall Street and the question’s going to be how do these two candidates respond?’”

     Harwood compared the event’s effect on the two campaigns, and noted Obama’s populist statement blaming the Bush administration.

     “Barack Obama has put out a statement this morning saying, ‘This underscores my call for change – that the economic philosophy, deregulation, not minding the store has contributed to this.’ You can expect that John McCain – when he addresses this later today in Florida is going to talk about the need for reform, which is the theme that he and Sarah Palin have.”

      Harwood speculated this would benefit Obama in the long run because he polls well on issues involving the economy.

     “We don’t know who’s going to come out ahead in the end, but I’ll speculate this guess Becky – it probably helps the Democratic ticket for this reason: Polls show that voters right now trust Democrats more than Republicans on the economy and John McCain has prospered in the last couple of weeks as the ground has shifted onto culture issues away from economic issues,” Harwood said.

     Although Obama has maintained his lead in polls concerning voters’ economic confidence, the gap has narrowed over the past two months according to an ABC News/Washington Post poll. The gap between Obama and John McCain has shifted from 54-38 percentage point edge in July to only a 47-42 percentage point difference in the most recent ABC News/Washington Post poll released on September 7.

     According to Harwood, Obama benefits from people’s focus being on the economy in the wake of banking calamity, instead of social issues.

     “This puts the debate right back on the economy that Barack Obama is uh, has wanted it – not lipstick on a pig or the whole range of culture issues that has lifted John McCain.”

     Bill Seidman, CNBC’s chief commentator disagreed with Harwood’s prediction. Seidman argued the situation could actually wind up benefiting Republicans.

     “So far, I’d say that Main Street is gaining,” Seidman said. “Oil prices are down. Commodity prices are down. Food prices are going down. Interest rates are going down – a lot of things that are going to help Main Street.”

     Seidman, who served as chairman of the Federal Deposit Insurance Corporation from 1985 to 1991, said it all hinged on jobs, but it could be a cleansing process for the bad credit in the economy.

     “And the whole question is – how’s it going to affect jobs?” Seidman said. “If jobs don’t fall off, this is going to be a good event for the average consumer. They’re cleaning out a lot of the leverage in the system and that ought to incidentally be good for the Republicans.”