Candidates step up efforts on economy

— -- Republican John McCain said Friday the Federal Reserve should stop bailing out the nation's failing financial institutions, while Democrat Barack Obama gave his support to the Bush administration's multi-pronged effort to stem the crisis.

The Fed "should get back to its core business of responsibly managing our money supply and inflation," McCain said in Green Bay, Wis.

"This isn't a time for fear or panic," Obama said in Florida, flanked by some of his economic advisers. "This is a time for resolve and for leadership," adding that he and McCain should work with other political leaders in a bipartisan fashion.

The two presidential candidates have stepped up their efforts on the economy as Wall Street grapples with a meltdown that this week alone has seen the Fed bail out American Insurance Group, Merrill Lynch merge with Bank of America, and Lehman Bros. seek bankruptcy protection.

Polls show the presidential race has tightened, including on the question of who can best handle the economy. Obama had a three-point lead earlier this month over McCain on the issue, but that number was within the USA TODAY/Gallup Poll's margin of error.

On Friday morning, Treasury Secretary Henry Paulson and Fed Reserve Chairman Ben Bernanke announced a costly program to buy up bad mortgages and other debt. The program, to be hammered out with Congress, could cost taxpayers hundreds of billions of dollars.

"Any action should be designed to keep people in their homes and safeguard the life savings of all Americans by protecting our financial system," McCain said, before Paulson and Bernanke spoke in Washington.

Responding to the Bush administration announcement, McCain senior adviser Douglas Holtz-Eakin issued a statement and said McCain was "pleased to see the executive branch and Congress" take steps.

In his Wisconsin remarks, McCain outlined a five-point plan for restoring trust in the markets and attacked Obama for links to troubled institutions such as mortgage giants Fannie Mae and Freddie Mac, which were bailed out by the government last week.

McCain's plan includes creation of "an early intervention program" to help lenders avoid bankruptcy. He also proposed actions to enforce greater transparency by financial firms; streamline the regulatory agencies that oversee banks, investments firms and mortgage companies; tighten laws against predatory lending and other corporate abuses; and develop consistent guidelines for taxpayer bailouts of troubled firms.

Obama discussed four principles that he said would help instill confidence in the economy.

They include programs to homeowners, businesses and students struggling with loans; increase corporate responsibility for financial failures; provide temporary relief for institutions as well as tough government oversight; and develop permanent changes with the help of other nations.

"I will refrain from presenting a more detailed blue-print of how an immediate plan might be structured until I can fully review the details of the plan proposed by the Treasury and the Federal Reserve," Obama said. "It is critical at this point that the markets and the public have confidence that their work will be unimpeded by partisan wrangling."

On politics, McCain criticized Obama for taking contributions from executives of Fannie Mae and Freddie Mac and for once placing former Fannie Mae CEO Jim Johnson in charge of his vice presidential selection process. The GOP nominee's campaign also released a TV ad spotlighting Johnson, who stepped down in June from his role in Obama's campaign because of controversy surrounding his tenure at Fannie Mae.

Obama has received more than $126,000 in contributions to his Senate and presidential campaigns from Fannie Mae and Freddie Mac executives and the companies' political action committees, according to an analysis by the non-partisan Center for Responsive Politics (CRP). McCain received $21,550 from the mortgage giants, the CRP study found.

"People like Sen. Obama have been too busy gaming the system and haven't ever done a thing to actually challenge the system," McCain said during his Wisconsin speech.

Obama criticized the deregulation philosophy associated with Republicans such as McCain. "What led us to this point was years and years of a philosophy in Washington and on Wall Street that viewed even common-sense regulation and oversight as unwise and unnecessary," he said, adding it also "shredded consumer protections and loosened the rules of the road."

Democrats pointed out that McCain campaign advisers Rick Davis and Charles Black worked for lobbying firms whose clients included Fannie Mae or Freddie Mac and noted that the candidate takes advice from Wall Street executives such as John Thain of Merrill Lynch.

"John McCain continues to throw stones from his seven glass houses," said Democratic National Committee spokesman Damien LaVera, but his campaign refuses "to offer any real solutions to the challenges facing America's working families."

Contributing: Associated Press