Democrats rejoice as financial crisis brings gloom to rivals' poll campaign

If the biggest stock-market decline in decades is terrifying investors and threatening the fragile economic recovery, it is also offering Democrats a gilt-edged opportunity ahead of this autumn's mid-term congressional elections.

After months of watching their Republican opponents basking in the reflected glory of President George Bush's stratospheric ratings as war leader, the rash of corporate scandals and the debacle on Wall Street have finally given the Democrats an issue that is unequivocally their own.

As one corporate misdeed after another comes to light, the Republicans are on the defensive, struggling to escape the charge of excess cosiness with big business that has hung around the party's neck since Herbert Hoover and the 1929 Wall Street crash.

Only last week, that fear manifested itself when 48 Senate Republicans supported a corporate reform bill clamping down on insider trading and accounting practices sponsored by the Democrat Paul Sarbanes. Notably tougher than the measure passed by the House of Representatives in April, the bill passed with virtually unheard-of unanimity, by 97-0.

Whatever doubts the Republicans harboured about the measure were swamped by a desire to be "on the right side of the issue". Almost certainly, the agreed House/Senate version will resemble the Sarbanes bill, which Mr Bush has refused to endorse. But now he must sign it or risk denting investor confidence further.

Even so, Democrats increasingly believe that public disgust at the scandals could hand them full control of Capitol Hill for the first time since 1994. The defection of the Vermont Republican Jim Jeffords last year returned the Senate to Democratic hands. They need a net gain of just six of the 435 seats to secure an overall majority. "If this thing plays out right, we could pick up 30 to 40 seats," Richard Gephardt, the House minority leader, has said. In American political terms, such a swing would be an earthquake.

The Republican rot, however, is from the head down. Unable to silence questioning about his dealings in the Texas oil business, and with Vice-President Dick Cheney's corporate record under scrutiny, Mr Bush has watched his approval ratings slide from a post-11 September high of 90 per cent to the mid-60s. Perhaps more ominously, fewer Americans believe the country is "on the right track". A survey yesterday in The Wall Street Journal suggested the public disapproved of Mr Bush's handling of the corporate crisis by a 46-40 per cent margin.

Unflattering comparisons are being made between Mr Clinton's economic team and its Bush counterpart.Paul O'Neill, the erratic and outspoken Treasury Secretary,has been notably silent on the woes of investors. Three times this month, Mr Bush has addressed the corporate good governance issue and each time Wall Street has answered with a big fall.

The one consolation for Republicans is, according to polls, that Americans still hold Mr Clinton at least equally responsible for the moral climate in which corporate wrongdoing has flourished. That factor could aid Jeb Bush, the President's brother and governor of Florida, in his re-election race this autumn.

His likely opponent is Janet Reno, Mr Clinton's attorney general. Her links with the previous administration could be a fatal handicap.

Demographics too are working against the Republicans. People aged 50 or more usually vote in disproportionate numbers at mid-term elections, where turn-out is smaller than in presidential years. This is the age group most worried about its savings, and thus most likely to dislike the Republicans.