U.S. presidential candidates blame China, the Fed, Obama for stocks rout

By Lisa Lambert and Alistair Bell

WASHINGTON (Reuters) - Jostling for position in the U.S. presidential race, candidates on Monday blamed Wall Street elites, the Federal Reserve, exposure to China, and President Barack Obama's spending policies for the market contagion from China's stock-market plunge.

As the Dow Jones industrial average briefly slumped to its biggest point-drop ever, Republican front-runner Donald Trump said he had long warned about U.S. exposure to China.

"I've been talking about China for years. Because China's going bad it's going to bring us down, too, because we're so heavily coupled with China," real-estate mogul Trump said on Fox News. "I'm the one that says you better start un-coupling from China because China's got problems."

Reflecting investors' concern over the Chinese economy, the Dow Jones dropped more than 1,000 points before staging a recovery. U.S. stocks still closed more than 3 percent lower.

The candidates' rhetoric brought back memories of the final months of the 2008 presidential election. which took place in the shadow of the financial crisis after the collapse of Lehman Brothers bank. Then Republican nominee John McCain briefly suspended his campaign in reaction to the financial chaos.

While global markets are still a long way from the 2008 crisis, the absence of new measures from Beijing to support Chinese stocks following an 11 percent drop last week sparked a free-fall in equities around the world and a selloff in oil and commodities.

Trump, whose outspoken views have helped propel him to the front of a crowded pack vying to become the Republican nominee for the November 2016 election, pointed a finger at hedge funds. He said that if he were elected to the White House, he would raise taxes on the wealthy and specifically target those working in high-stakes finance.

Fellow Republican candidate and former Hewlett-Packard Co chief executive Carly Fiorina said she had expected a market correction for "some time" and mostly blamed the Federal Reserve.

"I think the stock market has hit record highs over and over again because the Federal Reserve has ensured, through its easy-money policy, that the stock market is the only place you can earn a return," she said, referring to low interest rates.

With 17 candidates in the Republican field, presidential hopefuls are jockeying to be heard.

In the race for the Democratic nomination, liberal Senator Bernie Sanders also took a swipe at the financial industry.

"For the past 40 years, Wall Street and the billionaire class have rigged the rules to redistribute wealth to the richest among us," tweeted Sanders, the main rival so far to former secretary of state and Democratic front-runner Hillary Clinton.

Clinton herself has promised to tighten regulation of Wall Street if she wins the election, but made no public comment on the falling stock markets. Former Florida Governor Jeb Bush, a leading Republican candidate, was also silent.

CANCEL CHINESE VISIT

Scott Walker, the Republican governor of Wisconsin and a favorite of conservatives, called on Obama to show "backbone" and cancel a planned visit to the United States next month by Chinese President Xi Jinping.

"Given China’s massive cyber attacks against America, its militarization of the South China Sea, continued state interference with its economy, and persistent persecution of Christians and human rights activists, President Obama needs to cancel the state visit," Walker said.

New Jersey Governor Chris Christie, also a Republican candidate, said Obama's government had borrowed too much. Given China is a major buyer of U.S. debt, a market correction in the Asian superpower is "going to have an even greater effect because this president doesn't know how to say no to spending," he said.

"What you need to do in the Oval Office is rein this government in. Stop running up so much debt," he told Fox News.

Republican Mike Huckabee, a former governor of Arkansas who is hoping his down to earth style will capture the blue-collar vote in 2016, held "Washington-Wall Street elites" responsible for the market slump.

For the Obama administration, the barrage of critical comments from the campaign was to be expected.

Asked about the presidential contenders' remarks, White House spokesman Josh Earnest said their reaction "illustrates the difference between campaigning and governing."

(Additional reporting by Susan Heavey; Editing by Frances Kerry)

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