The $700 billion Wall Street rescue plan is proving politically tricky for Democratic Senatorial Campaign Committee Chairman Charles Schumer (N.Y.).

Although Schumer represents Wall Street and served as one of the lead negotiators for Senate Democrats on the package, he is walking a fine line between tapping into voter anger against vulnerable Republicans who voted for the bailout and defending the plan as necessary to avoid a meltdown of the credit markets.

On Wednesday, Schumer unveiled a new DSCC ad running in Kentucky that targets Minority Leader Mitch McConnell (R) and narrowly skirts the issue. McConnell joined Majority Leader Harry Reid (D-Nev.) in passing the bill. The ad never mentions McConnell’s vote for the rescue package, but it highlights McConnell’s ties to Wall Street.

“Wall Street and the big banks gave Mitch McConnell $4.4 million for his campaigns,” the narrator intones. “And he fought for less regulation of Wall Street. McConnell opened the gate and Wall Street went wild. And now our entire economy is at risk.”

The ad began airing Wednesday, Schumer said. The DSCC ad follows a script similar to one that McConnell’s Democratic opponent, millionaire health care executive Bruce Lunsford, has been airing this week. Following the near collapse of financial institutions on Wall Street in the past few weeks, McConnell’s double-digit lead over Lunsford has evaporated, with recent polls showing the race close.

Just this week, McConnell sent an e-mail to supporters detailing his support for the package, highlighting his bipartisan approach to the issue, and attempting to explain why he believes it was necessary to prevent further economic instability. Another newly endangered GOP Senator, Saxby Chambliss (Ga.), is airing an ad defending his support of the package as well.

Asked how he thought the bailout issue would play against McConnell, Schumer said Kentucky voters would have to decide for themselves whether McConnell made the right decision in voting for the rescue package.

“As you know, I supported it myself,” Schumer told reporters. “We’ll have to see how that plays out. It’s not the bailout itself. It’s the conditions leading up to needing a bailout and the difficulty in the economy that is sending voters in our direction.”

Schumer said DSCC ads have largely avoided the rescue plan and instead have been about “economic conditions, about deregulation, about special interests, about a need for change.”

Schumer insisted that he has had no discussions about how the rescue plan “politically affects things in these states.” But he pointedly declined to swear off running ads that attack Republicans for their votes in favor of legislation that he pushed.

“Again, I am not going to speculate on the kinds of ads we run,” Schumer said.

Republicans said Schumer is being hypocritical, not just about the bailout but also about the deregulation issue, given he voted in 1999 for a major rewrite of financial regulations that eliminated many barriers between banks, insurance companies and securities firms.

Plus, Republicans note the bipartisan nature of the rescue package — it passed the Senate 74-25 — makes it politically risky for Democrats to take a straight line of attack on the plan.

“DSCC’s hands are tied on this issue because they know voters blame Democrats just as much, and they can’t afford the hypocritical charge,” one GOP campaign operative said.

Meanwhile, Republicans and the National Republican Senatorial Committee have also been trying to use bleak economic conditions in their ads, arguing that Democratic policies might make the situation worse.

“The last thing voters want right now is to send a Democrat to Congress who plans to raise their taxes and spend their money on big government — we believe that message puts Republicans in a good position on Nov. 4,” NRSC spokeswoman Rebecca Fisher said.