Video: 'This is the greatest crisis since WWII'

updated 9/22/2008 3:21:51 PM ET 2008-09-22T19:21:51

Democrat Barack Obama and Republican John McCain raised doubts Monday about the Bush administration's $700 billion bailout and demanded conditions that could snag its quick passage through the highly partisan Congress.

Less than six weeks remained in the presidential contest as the candidates were preparing for their first debate on Friday, a confrontation on foreign policy and national security. Those issues, despite ongoing wars in Iraq and Afghanistan, have slid to a distant second place behind voter anxiety over the U.S. economy, which is in the midst of a financial crisis not seen since the 1930s Great Depression.

McCain, who only a week ago said the economy was fundamentally sound, now says the U.S. financial system is facing a major crisis. But he cautioned against giving too much power to Treasury Secretary Henry Paulson.

"Never before in the history of our nation has so much power and money been concentrated in the hands of one person. This arrangement makes me deeply uncomfortable," McCain told an Irish-American group in Pennsylvania, a key battleground state. "We will not solve a problem caused by poor oversight with a plan that has no oversight."

McCain praised Paulson and said he had spoken to him several times over the weekend. But the Republican candidate nonetheless called for a bipartisan oversight board for the proposed bailout, to be headed by Warren Buffet or another broadly respected business leader.

McCain also called on Congress to move quickly and work with the administration to restore stability to the troubled financial sector. But he said the goal of any action must be to allow homeowners to stay in their homes and prevent Wall Street executives from profiting from a taxpayer bailout.

Video: 'We've got to have relief for homeowners' Speaking on NBC television earlier Monday, McCain said, "We are in the most serious crisis since World War II."

He also said that despite the ballooning national debt he would not raise taxes if elected president.

In Green Bay, Wisconsin, Obama sounded a number of populist themes, saying of the economic bailout, "we cannot give a blank check to Washington with no oversight and accountability when no oversight and accountability is what got us into this mess in the first place."

He vowed to slash federal spending on private contractors by 10 percent in an effort to cut costs to help the failing economy, singling out Haliburtion, the giant oil services company that won millions of dollars in no-bid contracts in Iraq. Vice President Dick Cheney ran the company before moving into the Bush administration.

"The only way we can do all this without leaving our children with an even larger debt is if Washington starts taking responsibility for every dime that it spends," Obama said.

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Obama and his wife, Michelle, were campaigning in Wisconsin, a battleground state, while McCain planned stops in Pennsylvania, where the race was equally close. He was to be joined there by running mate Sarah Palin, the Alaska governor who has brought new life to the Republican ticket.

The candidates traded charges Sunday, each declaring the other unprepared to handle the U.S. financial meltdown that looms over the next American president. They likewise said there were too few assurances of oversight and guarantees that Paulson's unprecedented bailout would assist beleaguered citizens.

McCain cautioned against granting unchecked authority to Paulson, saying he is "greatly concerned that the plan gives a single individual the unprecedented power to spend $1 trillion on the basis of not much more than 'Trust me.'"

In a statement to reporters, McCain urged the creation of a bipartisan oversight board to review the government bailout rather than entrusting Paulson with complete power to craft it. He said the board should be headed by a trusted financial steward like billionaire financier Warren Buffett, and said former Massachusetts Gov. Mitt Romney and New York City Mayor Michael Bloomberg should be involved as well. Both Romney and Bloomberg made enormous fortunes in business ventures before entering politics.

"I believe we need a high level of oversight and an oversight board to impose real criteria for those who need help and those who do not and that we have a careful steward of the taxpayer's dollars," McCain said.

Obama ticked off seven conditions that he believed should be imposed on the Paulson proposal, joining some fellow congressional Democrats in raising warning flags and signaling the bailout mechanism might not make it out of the legislature by week's end as demanded by the Bush administration.

Obama said any bailout must include plans to recover the money, and protect working families and big financial institutions and be crafted to prevent such a crisis from happening again.

Video: Pa. polls show tight race "This plan can't just be a plan for Wall Street, it has to be a plan for Main Street. We have to come together, as Democrats and Republicans, to pass a stimulus plan that will put money in the pockets of working families, save jobs, and prevent painful budget cuts and tax hikes in our states," Obama said during a campaign stop in North Carolina.

Aides said Obama had spoken with Paulson, Fed Chairman Ben Bernanke, congressional leaders and former President Bill Clinton and Sen. Hillary Clinton in fleshing out his approach to the bailout.

McCain and Obama each had harsh words for their opponent as well.

At a campaign stop in North Carolina, Obama again blamed the crisis on Republican policies he said McCain was committed to continuing.

"We're now seeing the disastrous consequences of this philosophy all around us, on Wall Street as well as Main Street," Obama said. "Yet Sen. McCain, who candidly admitted not long ago that he doesn't know as much about economics as he should, wants to keep going down the same disastrous path."

Obama said the Bush administration's proposal to put a floor under the dangerous U.S. economic slide — one that many are worried could pull down the world economy — carried a "staggering price tag" but no plan to guarantee the "basic principles of transparency, fairness, and reform" to taxpayers who will pay for the huge and unprecedented government bailout.

McCain, at a National Guard convention in Baltimore, Maryland, said Obama was behaving more like a politician than a leader, faulting him for not offering a plan to stabilize financial markets after the crisis in the mortgage industry led to the collapse of two investment banks and the government bailout of housing lenders Fannie Mae and Freddie Mac and insurance giant American International Group, Inc.

"At a time of crisis, when leadership is needed, Senator Obama has not provided it," McCain said. "Whether it's a reversal in war, or an economic emergency, he reacts as a politician and not as a leader, seeking an advantage for himself instead of a solution for his country," McCain said of his Democratic rival.

Obama had previously declined to offer a financial recovery plan, saying he wanted to allow Paulson to address the matter without political intrusion. Obama's advisers criticized McCain's proposals as little more than talking points that lacked any meaningful detail.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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