How does John McCain react to the bad economic news?

He changes the subject!

In late afternoon trading, the Dow Jones industrial average fell 800 points, then recovered slightly in erratic trading to a loss of 764.38, or 7.40 percent, to 9,561.00, dropping below 10,000 for the first time since Oct. 29, 2004. The Dow surpassed its previous record for a one-day point decline -- 778, which the blue chips suffered a week ago when investors feared the bailout package might not pass Congress.

Harold Myerson has more:

"There's no question that we have to change the subject here," a senior Republican operative told The Post's Michael D. Shear in a story published Saturday.

The "subject" in question is the economy and how to fix it. As Americans have taken their eye off the ball -- that is, off John McCain's sterling qualities of character and command -- by focusing on the economy, Barack Obama has surged into the lead nationally and in many key battleground states.

So long as the candidates talk about that pesky economy, McCain's handlers have realized, McCain will continue to swoon. Thus the campaign has announced that it will go on the attack again on the momentous topics of Obama's ties to the Rev. Jeremiah Wright and Bill Ayers, the onetime Weatherman who has been a University of Illinois education professor for nearly two decades. [...]

But if the McCain people want to rummage through presidential candidates' associations, real or imagined, to turn up figures who threaten to pull down this proud republic, they should begin in-house. Chief among those to whom responsibility attaches for the financial crisis that is plunging the nation into recession is former Texas senator Phil Gramm, McCain's own economic guru.

Gramm was always Wall Street's man in the Senate. As chairman of the Senate Banking Committee during the Clinton administration, he consistently underfunded the Securities and Exchange Commission and kept it from stopping accounting firms from auditing corporations with which they had conflicts of interest. Gramm's piece de resistance came on Dec. 15, 2000, when he slipped into an omnibus spending bill a provision called the Commodity Futures Modernization Act (CFMA), which prohibited any governmental regulation of credit default swaps, those insurance policies covering losses on securities in the event they went belly up. As the housing bubble ballooned, the face value of those swaps rose to a tidy $62 trillion. And as the housing bubble burst, those swaps became a massive pile of worthless paper, because no government agency had required the banks to set aside money to back them up.

The CFMA also prohibited government regulation of the energy-trading market, which enabled Enron to nearly bankrupt the state of California before bankrupting itself.

The problem with this exercise, of course, is that Gramm's relationship to McCain is not comparable to the relationships that Ayers or Wright have with Obama. The idea that either Ayers or Wright would have any impact on the workings of an Obama administration is nonsensical. But Gramm and McCain do have an enduring political and economic alliance. McCain chaired Gramm's short-lived presidential campaign in 1996; Gramm is co-chair of McCain's current effort. McCain has not repudiated reports that Gramm is on the shortlist to become Treasury secretary if McCain is elected, even after Gramm labeled America "a nation of whiners."

Not to worry, Americans...

As Wall Street reeled and global markets plunged, President Bush on Monday said the U.S. economy is going to be "just fine" in the long run.

There now - don't you feel better having that reassurance from President Bush?