"Our economy is in a shambles," Obama said at a town hall meeting at a community college near Pittsburgh. "This economy is contracting, it is heading toward recession. We probably already are in one."
He later said the economic stimulus package signed by Mr. Bush needs to be supplemented by enacting this year the tax cuts for middle-income Americans that he had earlier proposed for the first year of the next administration. And he hinted that, if market conditions continue to deteriorate, he might even reconsider his call to roll back Mr. Bush tax cuts on capital gains and dividends.
"I want to monitor the situation. I never want to project a year from now and say, no matter what happens, I'm determined to do what I said a year or a year and a half ago," the Illinois senator told reporters.
But, Obama added, "The problem we have right now is not that the wealthy don't have enough tax breaks. The problem is ordinary Americans don't have spending power."
Clinton, meanwhile, told reporters in Washington it was a time of economic "stress and uncertainty" and said there was "urgency to continue the action that was started yesterday."
The comments from the presidential candidates came after the Federal Reserve approved a $30 billion loan for a $2-a-share takeover by JPMorgan Chase & Co. of Bear Stearns & Co. to help keep the stricken investment bank - one of the nation's largest - from collapse. The Fed also lowered the rates it charges to loan directly to banks by a quarter-point, following moves last week to lend $100 billion in cash to banks and $200 billion in government bonds to cash-strapped Wall Street investment banks.
"I'm not going to second guess the Fed," Clinton said, either on its steps to consummate the sale of Bear Stearns, on its decision to assume the risk of some of mortgage loans now assumed by JP Morgan Chase or on a decision to cut a key interest rate.
She complained about President Bush's handling of the problems.
"Now we are in the soup and we better get ourselves out of it before the consequences get drastic," Clinton said.
Obama said, "Things weren't that great before we tipped into recession."
He said the latest news from Wall Street "has confirmed our fears that the financial fallout from the mortgage crisis would spill over into the wider economy."
"Now, as the Federal Reserve does its best to bring stability to the market, we must focus on what we can do to restore the public's confidence in the market and help the millions of Americans who are worried about their jobs, their homes, and their financial future."
Both candidates said they were speaking with decision makers and monitoring developments.
Clinton said she spoke Monday morning with Treasury Secretary Henry Paulson and New York Federal Reserve President Tim Geithner about their actions to insure liquidity and restore confidence in the market. "I relayed to them my thoughts and concerns," she said.
Obama said he talked to the heads of some large Wall Street firms and had other calls scheduled. "Frankly, I think Secretary Paulson, along with (Fed Chairman) Ben Bernanke are taking some creative steps to deal with the issue. I'm encouraged that they're trying to act swiftly. I think it is important that Congress, the White House and the Fed are all working in concert."
He derided Mr. Bush for suggesting that the stimulus package should be given a chance to work and that policymakers shouldn't overreach at this time. He said the Fed might have limited ammunition left and urged steps to deal with the human consequences.
"Real people are losing their homes or at risk of losing their homes. Businesses can't get the credit they need to keep their doors open. My approach would be to be pragmatic."
Obama reiterated earlier calls to offer tax breaks to companies that "invest right here in Pennsylvania and all across America" and to give tax breaks "to ordinary Americans who deserve them right now."
He also urged Congress to pass legislation he is sponsoring with Sen. Chris Dodd, D-Conn., to create incentives for lenders to buy or refinance existing mortgages to help those facing foreclosure keep their homes.
"This is not a bailout for lenders or investors who gambled recklessly, and it is not a windfall for borrowers. It is a fair and responsible way to help stem the foreclosure crisis," he said.
As senator from New York, Clinton has received the most money from employees of large Wall Street firms. Bear Stearns employees contributed the most to Clinton with total donations of $152,000. Likely Republican nomineereceived $47,000 from Bear Stearns employees and Obama got $36,000.
Obama is the biggest recipient of donations from JPMorgan employees - Obama received $270,000, Clinton's contributions were nearly $200,000 and McCain's were more than $60,000. According to McCain's latest personal financial disclosure report, his wife and dependent children had between $3 million and $7 million invested in JPMorgan financial instruments.