Less than six weeks remained in the presidential contest yesterday as the candidates were preparing for their first debate this Friday, a confrontation on foreign policy and national security.

But those issues, despite ongoing wars in Iraq and Afghanistan, have slid to a distant second place behind voter anxiety over the economy amid a financial crisis on a scale not seen since the 1930s Great Depression.

Republican contender John McCain, who only a week ago said the economy was fundamentally sound, now says the United States financial system is facing a major crisis.

Speaking on NBC television yesterday morning, Mr 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.

A day earlier, he had traded charges with his Democratic rival Barack Obama, with both men declaring the other unprepared to handle the financial crisis that looms over the next president.

They likewise said there were too few assurances of oversight and guarantees that Treasury Secretary Henry Paulson's unprecedented bailout would assist beleaguered citizens.

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

In a statement to reporters, he urged the creation of a bipartisan oversight board to review the government bailout rather than entrusting Mr Paulson with complete authority to craft it.

He said the board should be headed by a trusted financial steward like billionaire financier Warren Buffett.

'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,' Mr McCain said.

Meanwhile, Mr 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 signalling that the bailout mechanism might not make it out of the legislature by the end of the week, as demanded by the Bush administration.

He 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.

'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,' he said during a campaign stop in North Carolina.

Mr McCain and Mr Obama had harsh words for each other as well.

Mr Obama again blamed the crisis on Republican policies he said Mr 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,' he said.

'Yet Senator 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.'

Mr Obama said the Bush administration's plan to put a floor under the dangerous US economic slide 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 bailout.

But Mr McCain, at a National Guard convention in Baltimore, Maryland, said his opponent was behaving more like a politician than a leader, faulting him for not offering a plan to stabilise financial markets.

'At a time of crisis, when leadership is needed, Senator Obama has not provided it,' Mr 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.'

ASSOCIATED PRESS