(AFP) – Sep 30, 2008

RENO, Nevada (AFP) — Open warfare erupted in the White House race Tuesday over the costly failure by US lawmakers to approve an economic rescue bill, even as both candidates appealed for cooler heads to prevail.

Democrat Barack Obama and Republican John McCain both telephoned President George W. Bush to offer new ideas on breaking the impasse in Congress after the House of Representatives Monday shot down the 700-billion-dollar package.

Campaigning in the battleground state of Nevada, Obama noted the bill's failure had triggered a bloodbath on markets with 1.2 trillion dollars wiped off New York share values alone Monday.

That was not just a crisis for Wall Street, but for every US worker with a pension investment and every small company reliant on lines of credit to stay in business, he said.

It was an "outrage" that taxpayers were having to foot the bill for financiers' folly, Obama said, but stressed that without action by Congress, "millions of jobs could be lost, a long and painful recession could follow."

"There will be time to punish those who set this fire, but now is the moment for us to come together and put the fire out.

"To the Democrats and Republicans who opposed this plan yesterday, I say step up to the plate. Do what's right for the country," the Illinois senator said in Reno.

The stalled Wall Street rescue package would allow the government to purchase up to 700 billion dollars in bad, mortgage-related debts from financial firms endangered by the collapse of the US housing market.

McCain said in Des Moines, Iowa: "Yesterday the country and the world looked to Washington for leadership, and Congress once again came up empty-handed.

"I am disappointed at the lack of resolve and bipartisan good will among members of both parties to fix this problem," the Arizona senator said.

"Congressional inaction has put every American and the entire economy at the gravest risk," McCain warned, citing individual companies and student groups now struggling to get loans because of the credit crunch.

Both contenders in the November 4 election called for federal deposit insurance for US families and small businesses to be raised for the first time in 28 years, in a bid to get rebellious lawmakers back on board.

Both pledged new efforts to persuade their party colleagues, with McCain warning "the dire consequences of inaction" would reverberate far beyond Wall Street.

Both accused Bush, whose repeated appeals to Congress have fallen on deaf ears, of failing to sell the plan properly.

Congressional leaders said Tuesday they could pass a revised 700 billion dollar Wall Street bailout within days, after their first attempt failed.

Chris Dodd, chairman of the Senate Banking Committee, said leaders in both chambers were working on the timing of bringing an amended bailout legislation to a vote.

"I am quite confident that we are moving in the right direction, and that we should end up with a very positive outcome in the next 24 or 48 hours," Dodd said.

However, there was an eruption of partisan sniping as blame was traded over the bill's failure, with the Republican Party releasing a new ad saying Obama's policies would drive up taxes and spending and "make the problem worse."

A second McCain ad also accused Obama of being a "hypocrite."

"First, Obama attacked McCain. Then said: 'We've got the long term fundamentals that will really make sure this economy grows,'" the ad said, inserting a video clip of an Obama speech.

But the campaign of Obama, who has targeted McCain for saying the fundamentals of the economy were strong, hit back, charging that his words had been completely twisted.

The latest Gallup tracking poll had Obama ahead of McCain by 49 percent to 43. Another poll by ABC News found voters blaming Republicans for the bailout bill's failure, rather than Democrats, by a margin of two to one.

Both Obama and McCain called on Bush to raise federal deposit insurance for accounts held in US banks, from 100,000 dollars to 250,000 dollars.

McCain said he also recommended to Bush that the Treasury use its 250-billion-dollar "exchange stability fund" to directly shore up Wall Street firms, and inject a separate fund of one trillion dollars to buy up distressed mortgages.

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