Clinton, Obama criticize McCain over economy

NEW YORK  - Democrat Barack Obama said Thursday a firmer government hand is needed on Wall Street and a $30 billion stimulus is needed to rescue homeowners and the jobless. Rival Hillary Rodham Clinton called for a new job retraining program to remedy what both candidates derided as Republican indifference to a sputtering economy.

Both Obama and Clinton argued that Republican nominee-in-waiting John McCain isn't ready or willing to handle an economic emergency.

"The phone is ringing, and he would just let it ring and ring," Clinton said, echoing the "3 a.m. phone call" TV ad she used earlier to suggest she was more qualified than Obama to handle a national security crisis. Speaking in Raleigh, N.C., she chastised McCain for opposing government intervention in the nation's credit and mortgage crisis.

Clinton focused on job insecurity and said the government needed to take more responsibility for helping displaced workers. The state holds its primary May 5.

"Our government is more focused on how you lost your job than how you can find a new one," Clinton said. "And while we have been rightly focused on trying to help people who are out of work, there's been too little thought and effort to help people gain new skills while they still have their existing jobs."

Among other things, the former first lady called for a new program to extend federal aid known as Pell Grants to workers enrolled in education programs aimed at updating their skills. She also promoted a pre-emptive training initiative to allow workers concerned about potential threats to their jobs to receive grants to help transition into other industries.

While many of the two Democrats' ideas on the economy overlap, Obama laid out six different areas where he would stiffen regulations of the financial system. He proposed relief for homeowners and the long-term unemployed as part of an additional $30 billion stimulus package, much like the one Clinton offered last week.

He said outdated government regulations have fallen dangerously behind the realities of modern finance.

"We do American business - and the American people - no favors when we turn a blind eye to excessive leverage and dangerous risks," Obama said.

The presidential candidate spoke not far from Wall Street, which has been suffering from the aftereffects of the collapse of the housing market and a credit crunch. New York Mayor Michael Bloomberg, the almost candidate, warmly introduced Obama but stopped short of an endorsement.

The economic setbacks of recent months, Obama argued, show hardships long felt by middle class Americans had now spread everywhere.

"Pain trickles up," he said.

"If we can extend a hand to banks on Wall Street, we can extend a hand to Americans who are struggling," he said.

Bemoaning the nation's economic woes, Obama, like Clinton, dismissed McCain's approach as pure hands-off. On Tuesday, McCain derided government intervention to save and reward banks or small borrowers who behave irresponsibly though he offered few immediate alternatives for fixing the country's growing housing crisis. Obama said McCain's plan "amounts to little more than watching this crisis happen."

Instead, Obama said, the next president should:

-Expand oversight to any institution that borrows from the government.

-Toughen capital requirements for complex financial instruments like mortgage securities.

-Streamline regulatory agencies to end overlap and competition among regulators.

While he laid out a half-dozen principles for closer scrutiny of the financial markets, he did not detail how the different agencies should be organized or exactly how the government should go about peering over the shoulders of bank executives, though aides said later the Federal Reserve would have to assume a greater role.

Although Obama blamed both Republican and Democratic administrations for letting markets get out of control, he took a particular swipe at Clinton's husband, former President Bill Clinton, without naming him explicitly. Obama said outdated bank regulation needed to be reformed in the 1990s, but "by the time the Glass-Steagall Act was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework." President Clinton signed that repeal.

"Unfortunately, instead of establishing a 21st century regulatory framework, we simply dismantled the old one, aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight," Obama said in a thinly veiled reference to Bill Clinton's oft-repeated promise to build a bridge to the 21st century.

Both Democrats reserved most of their criticism for McCain, but Clinton policy director Neera Tanden later dismissed Obama's proposals as either mimicking ideas the New York senator had already offered, or, in the case of regulatory changes, a "broad series of vague principles."

Obama advisers said the regulatory changes he was offering are designed to be starting points for legislative and executive changes to come.

Even before the Democrats delivered their speeches, McCain said in a statement, "There is a tendency for liberals to seek big government programs that sock it to American taxpayers while failing to solve the very real problems we face."

The political debate comes as a new government report shows the economy nearly sputtered out at the end of the year and is probably faring even worse amid continuing housing, credit and financial crises.

The Commerce Department reported that gross domestic product - the value of all goods and services produced in the country - increased at a feeble 0.6 percent annual rate in the October-to-December quarter. The reading - unchanged from a previous estimate a month ago - provided stark evidence of just how much the economy has weakened. In the prior quarter, the economy clocked in at a sizzling 4.9 percent growth rate.