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 said the direct cost would be roughly $300 billion. "It's not Sen. Obama's proposal. It's not President Bush's proposal."

Obama said he would work for what he called a middle-class rescue package that would include tax cuts for most Americans plus efforts to work toward energy independence and reduce the cost of 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 continuing financial crisis, and the widespread sense of fear that has come with it, provided the backdrop for the 90-minute question-and-answer session at Belmont University in Nashville, Tenn.

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

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

The debate was moderated by Tom Brokaw of NBC News. Most of the questions came from about 80 undecided Tennessee voters seated around the candidates in a circle; the rest were submitted over the Internet. The voters in the hall were assembled by the Gallup Organization, working on behalf of the sponsoring Commission on Presidential Debates.

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

New polls from Time/CNN/Opinion Research had Obama leading in Wisconsin and New Hampshire, ahead by a small margin in Ohio, running even in North Carolina, and behind in Indiana.

The town-hall-style 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.

Obama, on the other hand, tends to do better with a speech text in front of him. While he has taken questions from voters at his events from time to time, he has done so rarely in the past few months and not at all since Sept. 12.

In the days since the two candidates' first debate, Sept. 26, the presidential race has become much nastier, with each campaign seeking to highlight missteps that the opposing candidate committed in the past.

The fourth and final debate of the general election campaign - the third between Obama and McCain - is scheduled for next Wednesday at Hofstra University in Hempstead, N.Y., with Bob Schieffer of CBS News as the moderator.

The format will be more similar to that of the first debate, except the subject matter will be domestic issues, including the economy.

From Nashville, McCain was headed today to Pennsylvania for an early afternoon rally with running mate Sarah Palin at Lehigh University in Bethlehem.

McCain's campaign continues to pour money and candidate time into Pennsylvania, which his aides believe may be their best hope to take a Democratic blue state and turn it Republican red.

In five surveys taken in Pennsylvania over the last two weeks, McCain trails Obama by an average of 12 percentage points.

The Democratic nominee, who is expected in Philadelphia Friday night and much of Saturday, was to be in Indianapolis today.