ASHEVILLE, N.C. (Reuters) - Democrat Barack Obama counterattacked on Sunday against a new Republican tactic by saying rival John McCain was more interested in a smear campaign than fixing the U.S. economy.
The Obama campaign unveiled an ad hitting McCain as one of the "Keating Five" senators who met federal regulators on behalf of a California savings and loan institution that collapsed in 1989. The ad faults McCain as unwilling to regulate the financial industry.
With McCain losing ground in opinion polls, a campaign strategist was quoted as saying the Republican presidential candidate needed to "turn the page" on the economic issue and make the election about Obama's experience and character.
That effort started on Saturday when Republican vice presidential candidate Sarah Palin accused Obama of "palling around with terrorists" in reference to his acquaintance with Bill Ayers, a former member of the Vietnam War-era militant Weather Underground.
"Senator McCain and his operatives are gambling that he can distract you with smears rather than talk to you about substance," Obama responded at a rally in Asheville, North Carolina, a swing state where he was preparing for his second debate with McCain on Tuesday.
"They'd rather try to tear our campaign down than lift this country up," the Democratic presidential candidate said.
"It's what you do when you're out of touch, out of ideas and running out of time," Obama told a crowd of 20,000 attending the rally one month from the Nov. 4 election.
Obama's improvement in the polls has been fueled by the public's perception that he can best handle the ailing economy. The Illinois senator kept the focus on the economy and used the "turn the page" quote as a way of keeping the issue alive.
"We're facing the worst economic crisis since the Great Depression, and John McCain wants us to 'turn the page?'" Obama said.
"Well, I know the policies he's supported these past eight years and wants to continue are pretty hard to defend. I can understand why Senator McCain would want to 'turn the page' and ignore this economy."
Then he poked fun at Palin's folksy way of speaking by saying: "We're not going to let John McCain distract us. We're not going to let him hoodwink ya, and bamboozle ya, we're not going to let him run the okie doke on ya."
The Obama campaign released a new ad hitting McCain as erratic during the past two weeks of economic crisis, a reference that could be interpreted as subtle reminder of McCain's age. The Arizona senator, age 72, would be the oldest person elected president for the first time.
McCain was cited by the Senate Ethics Committee in 1991 for "poor judgment" for taking part in the meetings with regulators but said his role was minimal. The committee ruled three senators improperly interfered with an investigation of Lincoln Savings and Loan, whose collapse cost taxpayers more than $2 billion. Its head Charles Keating was convicted of fraud.
But McCain's supporters and his campaign did not back down. They pushed the issue of Obama's character on the Sunday television talk shows and defended linking Obama with Ayers.
"The last four weeks of this election will be about whether the American people are willing to turn our economy and national security over to Barack Obama, a man with little record, questionable judgment, and ties to radical figures like unrepentant domestic terrorist William Ayers," McCain spokesman Tucker Bounds said.
Ayers was one of the leaders of the Weather Underground when it was involved in a series of bombings in the 1960s, when Obama was 8 years old. Obama met him in the 1990s when first starting his political career in Chicago and the two served on a board together.
Obama has said he knows Ayers, a professor at the University of Illinois at Chicago, only slightly and has denounced his actions with the Weather Underground.
Republican Sen. Mel Martinez of Florida said on ABC's "This Week" it was not what Obama did when he was 8 but "what occurred when he was 35 - 38 years old and was initiating his political campaign."
"It's about his judgment and who he associated with during those years and right on into his political campaign," he said.
"It is fair game," Sen. Joe Lieberman, an independent from Connecticut who supports McCain, said on "Fox News Sunday."
But Democrats responded that the Republicans were just trying to trivialize the race and take the spotlight off McCain and the economy."
"How ridiculous," Democratic Sen. Claire McCaskill of Missouri said on Fox. "American people deserve so much better."
"You have seen a 26-year Senate veteran morph into an angry, desperate candidate in the last few weeks, especially in the last few days," Democratic Sen. Sherrod Brown of Ohio told ABC. "And it just kind of makes me sad ... that John McCain and Sarah Palin are resorting to these tactics."
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