RED LODGE - Sen. Max Baucus defended the Democratic Party ad that Republican Mike Taylor cited last week as a reason for dropping out of the U.S. Senate race, and said he was stunned when he heard about Taylor's decision.

But Baucus, who first commented Saturday on the announcement, stressed he had nothing to do with the ad that accused Taylor of mishandling student loan money while running a Colorado beauty school in the 1990s.

Baucus, a Democrat, said he learned of Taylor's decision a few hours before the official announcement Thursday.

"This just never happens," he told The Associated Press Saturday during campaign stops in Red Lodge.

Baucus said he did not believe Taylor's decision would keep others from seeking political office or that there would be voter backlash at the polls next month.

Baucus said he first saw the commercial last weekend during a local newscast.

"It's totally factual. It's totally accurate," Baucus said.

The Democrats' ad cited U.S. Department of Education documents that concluded Michael Taylor's Institute for Hair Design provided loans to students enrolled in a program ineligible for financial assistance and failed to properly refund student loan money when they left school.

The reports also said the school gave loans to students no longer attending class or failing to meet academic standards, and failed to verify loan eligibility of some students.

Taylor has acknowledged the school made clerical errors in handling loans but denied a scam to profit from a federal aid program. And he said the loan issue wasn't what prompted him to leave the race - it was pictures he said portrayed him as a gay hairdresser.

The commercial showed videotape of a young Taylor wearing an open-front shirt and chains around his neck and massaging a man's face during a TV segment he hosted in the 1980s.

"I don't know if it's unflattering," Baucus said, noting that some commercials against him have used old or grainy photographs. "I had sideburns in the '70s; he had sideburns in the '80s."

Taylor remains on the ballot as the Republican candidate and Baucus, chairman of the Senate Finance Committee, said that Taylor's sudden exit from the race would not affect his campaign style: stressing his record during four terms; laying out his goals in such areas as the economy, health care and education; and listening to voters' concerns.

On Saturday, these ranged from affordable health insurance to prescription drug coverage and the recently passed resolution on Iraq. Voters shied away from asking Baucus about Taylor. And Baucus didn't bring him up.

It seemed an average day on the campaign trail. Baucus cradled a baby, shook hands, posed for pictures. He drove a red fire truck, gave speeches and knocked on doors.

At the Red Lodge senior center, where Baucus stumped at a "Burger Bonanza," a man congratulated the Democrat on winning his race. Baucus replied with a quick, "Nah," and quickly brushed by.

John Elsberry, a business consultant and father from Red Lodge, called Taylor a quitter and said he would rather hear Baucus' thoughts on a possible war with Iraq than his take on Taylor.

Writer Mariann Mahady agreed. "Taylor didn't seem to have any inner tenacity. You need that in politics."

Volunteer firefighter Brian Hedrick said he wasn't sure who he'd vote for until Taylor said he was dropping out. Now, Taylor is his candidate.

"I see the Democratic party and Baucus as one," he said.

Christy Hedrick, his wife, said negative ads turned her off as a voter. "I think it's a crappy way to win an election."

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