John McCain embarked on a desperate – but defiant – damage-control exercise yesterday as he sought to justify his claim that despite violent convulsions in America’s financial markets the “fundamentals of our economy are strong”.

His Democratic rival has pounced on the comment as proof that the 72-year-old Republican nominee is “out of touch” not only with the plight of investors on Wall Street, but also the pain of homeowners and workers on Main Street.

Barack Obama released an advertisement that quoted Mr McCain’s remark no less than three times, spliced with headlines such as “Lehman Brothers Collapses,” “Markets In Turmoil” and “Foreclosures at 9,800 A Day”. It asked how can he “fix our economy if he doesn’t understand it’s broken?”

Mr McCain appeared on six morning TV shows, saying that what he meant was that “the fundamental of our economy is the American worker”. He added: “They have been betrayed by a casino on Wall Street of greed, corruption and excess that has damaged their futures.”

Mr McCain called for an inquiry modelled on the 9/11 Commission “to find out what happened” as he alleged that the “old-boy network and corruption in Washington is involved”. He added: “I know how to fix it.”

He continued with this populist theme at a campaign rally in Florida and Ohio – where he scorned Mr Obama for pretending he is “siding with the people just before he flew off for a fundraiser in Hollywood with Barbra Streisand”. The Republican senator added: “There’s no place I’d rather be than right here with the working men and women of Ohio.”

Mr Obama, however, said that the meaning of Mr McCain’s words were plain for all to see because the Republican nominee had used the same formulation to describe the supposed strength of the economy on 16 occasions in recent months.

His team believed that they have been vindicated by events after spending more than a fortnight struggling to gain traction with a message focused on the gathering economic storm when voters were fixated on Mr McCain’s running-mate, Sarah Palin.

Senior Democrats believe that the “Palin phenomenon” is fading and that this week will be seen as a turning point with the spotlight returning to Mr McCain and the failures of President Bush.

Mr Obama has repeatedly called for greater regulation of investment banks, mortgage brokers and hedge funds, as well as promising to create a watchdog monitoring threats to the financial system.

Speaking in Golden, Colorado, he contrasted this approach with that of Mr McCain, which “was the same as the Bush Administration’s – support ideological policies that made the crisis more likely, do nothing as the crisis hits, and then scramble as the whole thing collapses”.

He added: “This is what happens when you confuse the free market with a free licence to let special interests take whatever they can get. We’ve had this philosophy for eight years. We know the results.”

Mr McCain, a former chairman of the Senate Commerce Committee, has consistently opposed government interference with market forces, telling The Wall Street Journal earlier this year: “I’m always for less regulation”. In Tampa, Florida, he pinned much of the blame on “regulatory agencies in Washington” which “haven’t been doing their job right”.

His efforts were not helped by his two top economic advisers. Carly Fiorina and Douglas Holtz-Eakin. Ms Fiorina, a former chief executive of Hewlett Packard, veered off-message to concede that neither Mr McCain nor Mrs Palin were qualified to run a major company.

Mr Holtz-Eakin was later described by Mr McCain’s spokesman as making a “bone-headed joke” when telling reporters that the Republican nominee had helped to invent the BlackBerry. Holding one of the devices aloft, he declared: “He did this!”

Mr Obama’s spokesman said: “If McCain hadn’t said ‘the fundamentals of our economy are strong’ on the day of one of our nation’s worst financial crises, the claim that he invented the BlackBerry would have been the most preposterous thing said all week.”

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