The New Nation - Internet Edition

AFP, Asheville

Democrat Barack Obama, responding to his portrayal by John McCain's campaign as a crony of "terrorists," fought fire with fire Monday by highlighting the Republican's embroilment in a devastating 1980s financial scandal.

A month from election day on November 4, the rivals traded furious barbs as Arizona Senator McCain battled to arrest his Illinois opponent's poll surge at a time of deep anxiety about the state of the US economy. Obama rolled out a new advertisement and email onslaught recalling McCain's complicity in the scandal over jailed tycoon Charles Keating, the collapse of whose savings and loan firm wiped out the savings of many elderly retirees.

McCain was part of a group of lawmakers that became known as the "Keating Five" that received gifts and favors from the businessman and intervened with regulators to insist his company was in good health.

The Republican escaped with a formal censure by the Senate in 1991 but spoke of the searing embarrassment caused by the scandal, which cost the US government 124 billion dollars to bail out the entire savings and loan industry, and went on to become a crusader for ethics reform.

"Sound familiar?" Obama campaign manager David Plouffe said in an email to supporters, after Congress last week passed a 700-billion-dollar bailout for Wall Street.

"The McCain campaign has tried to avoid talking about the scandal, but with so many parallels to the current crisis, McCain's Keating history is relevant and voters deserve to know the facts-and see for themselves the pattern of poor judgment by John McCain," he said.

The war of words sparked by McCain's running mate Sarah Palin raised the stakes still higher as the presidential contenders prepared to face off at the second of three debates on Tuesday.

Alaska Governor Palin Saturday accused Obama of "palling around with terrorists," a reference to his ties in Chicago to former militant William Ayers, whose "Weathermen" group bombed government buildings in the 1960s and 1970s.