McCain proposed having the U.S. Treasury buy up bad home loans and renegotiate them to reflect the current, depressed values of those homes. Until the government works to stabilize housing values, he said, the economic difficulties will persist.

"It's my proposal," said McCain, whose campaign put the direct cost at roughly $300 billion. "It's not Sen. Obama's proposal. It's not President Bush's proposal."

Obama, who said two weeks ago that the government should "consider" such a plan, pledged to work for a "middle-class rescue package" to include tax cuts for most Americans plus efforts to work for energy independence and cheaper health care.

"I am confident about the American economy," Obama said, but "most important, we're going to have to help ordinary families stay in their homes, make sure they can pay their bills."

The financial crisis, and the widespread sense of fear that has come with it, provided the backdrop for the 90-minute, town-hall-style question-and-answer session at Belmont University in Nashville.

McCain, in various answers, sought to look to the future and stress his record of working with Democrats to deal with such issues as campaign-finance reform and climate change.

Obama tried to place the blame for the nation's problems on the Bush administration's policies, many of them supported by McCain, which Obama said have caused explosive growth in federal spending and the deficit.

The debate, which was civil for the most part, was devoid of the character attacks that have dominated the campaign in the last few days. Which is not to say the candidates did not draw contrasts.

Obama denounced McCain's plans to cut corporate tax rates and keep the Bush tax cuts in place for upper-income Americans.

That brought this reply from McCain: "Nailing down Sen. Obama's various tax proposals is like nailing Jell-O to the wall - there've been five or six of them . . . but he wants to raise taxes."

In response, Obama said he would cut taxes for all families making less than $250,000 a year and quipped: "Sen. McCain, I think the Straight Talk Express lost a wheel on that one."

Even though the economic situation is likely to get in the way of any immediate effort to reform the nation's health-care system, the candidates got into a prolonged discussion about their plans to do just that.

Obama favors a mixed approach that includes mandating that parents secure coverage for their children, with government funding for families who can't afford it.

McCain wants to move toward an expanded market in health insurance by giving families a $5,000 refundable tax credit for use in buying coverage. At the same time, he would tax employer-provided benefits, which are now tax-free.

"What one hand giveth, the other taketh away," Obama said, criticizing McCain's approach.

"Do the math," McCain shot back. "Ninety-five percent of the American people will have increased funds to go out and buy the coverage you want. . . . We have got to give people choice in America."

"He believes in deregulation in every circumstance," Obama said. ". . . That's a fundamental difference."

Although most of the questions, from undecided voters in the hall and online, concerned domestic matters, the candidates engaged in several pointed exchanges on foreign policy, including the war in Iraq and U.S. relations with Pakistan.

McCain said of his rival: "In his short career, he does not understand our foreign-policy challenges. And we can't afford on-the-job training."

Replied Obama: "He's right - some things I don't understand. I don't understand why we invaded a country [Iraq] that had nothing do with 9/11."

On Pakistan, Obama stuck to his position that it might be necessary for U.S. troops to go into that country to capture or kill Osama bin Laden without seeking the approval of the Pakistani government.

McCain said it was wrong for a would-be president to announce such a plan in advance, adding that the right idea was to follow President Theodore Roosevelt - to speak softly and carry a big stick.

"Sen. Obama likes to talk loudly," McCain said.

The Illinois senator said McCain was in no position to be critical. "This is a guy who sang 'bomb, bomb, bomb Iran,' who called for the annihilation of North Korea."

The debate was moderated by Tom Brokaw of NBC News, who struggled to make the candidates abide by the time limits for their answers.

Heading into last night, McCain was the candidate in need of a game-changing event. With only four weeks until Election Day, polls show him trailing Obama by an average of more than five points nationally and lagging in most battleground states.

The town-hall format was very much to McCain's liking. In his own campaign, he employs it frequently and often seems more comfortable taking questions from voters than delivering set speeches.

Neither candidate seemed to have any trouble with it last night, with both roaming freely around the stage and engaging their questioners.

The third and final presidential debate is next Wednesday at Hofstra University in Hempstead, N.Y.

From Nashville, McCain was headed today to Pennsylvania for an early afternoon rally with running mate Sarah Palin at Lehigh University in Bethlehem. His aides believe Pennsylvania may be their best hope to take a Democratic blue state and turn it Republican red.

Obama, who is expected in Philadelphia on Friday night and much of Saturday, was to be in Indianapolis today.