With US financial institutions reeling under what Mr Obama called the worst crisis since the Great Depression, the presidential rivals in the Nov 4 election differed frequently with only rare flashes of the open rancor that has marked their recent rhetoric on the campaign trail.
'Americans are angry, they're upset and they're a little fearful,' Mr McCain said in the second presidential debate, at Belmont University in Nashville, Tennessee. 'We don't have trust and confidence in our institutions.'
The Arizona senator, criticised for not being responsive on economic issues, was under pressure in the debate to stop his slide in the polls and halt the momentum for Mr Obama that has bloomed during the economic crisis.
He proposed a new programme, to be run by the Treasury Department, which would buy mortgages from homeowners facing financial problems and replace those mortgages with new, fixed-rate mortgages.
His campaign said the program would cost roughly US$300 billion (S$440 billion). Democrats in Congress have been calling for months for legislation to help families facing home foreclosures.
Mr Obama said the financial crisis was aided by deregulation of the financial industry supported by Mr McCain and Republicans.
He said middle-class workers, not just Wall Street, needed a rescue package that would include tax cuts.
'We are in the worst financial crisis since the Great Depression, and a lot of you I think are worried about your jobs, your pensions, your retirement accounts,' he said.
Mr McCain portrayed Mr Obama as an eager supporter of higher taxes who was unwilling to buck his own party, but Mr Obama said Mr McCain's policies would help the wealthy and strand workers at the bottom of the economic ladder.
'Nailing jello'
'Nailing down Senator Obama's various tax proposals is like nailing Jello to the wall,' Mr McCain said.
Mr Obama responded with a crack about McCain's campaign bus.
'I think the Straight Talk Express lost a wheel on that one,' he said, explaining his plan would only tax those making more than US$250,000 a year and most small businesses would not be affected.
Mr Obama has solidified his national lead in polls ahead of the election and gained an edge in crucial battleground states in recent weeks as the Wall Street crisis focused attention on the economy, an area where polls show voters prefer the Illinois senator's leadership.
The economic turmoil continued on Tuesday, with stocks tumbling for the second consecutive day in a sign the US$700 billion bailout of US financial institutions did not ease market concerns about the economy.
Asked about a possible Treasury secretary under their administrations, both candidates mentioned Omaha's legendary investor Warren Buffett, a supporter of Mr Obama.
The two candidates also clashed sharply in the final third of the debate over foreign policy, particularly the Iraq war.
Mr Obama was an early critic of the war, while Mr McCain has been a staunch supporter and urged the 'surge' strategy to increase US troops.
'Senator Obama would have brought our troops home in defeat. I will bring them home in victory and in honour,' Mr McCain said.
Mr Obama said the focus on Iraq had distracted the United States from the threat in Afghanistan, and he defended under attack from Mr McCain his willingness to strike against terrorists in Pakistan without approval from Islamabad.
'We have fundamental differences about the use of military power,' Mr McCain said.
Polls judged Mr Obama the winner of the first debate two weeks ago, but Tuesday's debate was conducted in a looser town hall format where questions were asked by the audience - a favourite setting for Mr McCain and a staple of his campaigns in the battle for the party nomination this year and in 2000.
About 100 undecided Nashville voters identified by the Gallup polling company posed the questions. The candidates talked directly to the audience and were free to roam the stage.
With only four weeks to go until the election, the two candidates will meet for one final debate on Oct 15. -- REUTERS