CHICAGO, Oct 8, 2008 (AFP) - Barack Obama's campaign on Wednesday rejected John McCain's plan to buy up 300 billion dollars of bad home loans clogging the US economy as too expensive and an example of 'erratic' leadership.

The Republican nominee unveiled the idea in his presidential debate clash with Democratic rival Obama Tuesday, in an attempt to change a trajectory of a race that seems to be sliding away four weeks before the election.

At the time, the Obama campaign said the plan was nothing new and argued the Democrat had already suggested something along similar lines.

But Obama's economic advisor Jason Furman came back with a much stronger response on Wednesday, as both candidates went back to throwing long-distance insults a day after their muted debate showdown.

'(McCain) threw out a proposal that appeared to give the Treasury authority it already has to re-structure troubled mortgages,' Furman said.

'But now that he?s finally released the details of his plan, it turns out it?s even more costly and out-of-touch than we ever imagined.

'John McCain wants the government to massively overpay for mortgages in a plan that would guarantee taxpayers lose money, and put them at risk of losing even more if home values don?t recover.'

Furman said the biggest beneficiaries of this plan would be the same corrupt financial institutions responsible for pitching the US economy and global economy into crisis.

'John McCain?s plan to overpay for bad mortgages by handing taxpayer dollars over to big financial institutions is erratic policy-making at its worst,' Furman said, touching a campaign theme that McCain is too impulsive to be trusted with the presidency.

McCain said during the debate he would, as president, order the secretary of the treasury to 'immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes, at the diminished value of those homes.'

The idea would enable struggling homeowners to meet their mortgage payments and stay in their homes, he said.

'Is it expensive? Yes,' he said. 'But we all know, my friends, that until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing our economy.

The McCain camp said that the Obama camp comments proved the Illinois senator was out of touch with middle class Americans.

'By opposing John McCain's effort to help Americans stay in their homes, it is clear that Barack Obama would rather support a bailout of Wall Street than rescue Main Street America,' McCain economic advisor Doug Holtz-Eakin said.

The McCain 'American Homeownership Resurgence Plan' would buy mortgages directly from homeowners and mortgage servicers, and replace them with fixed-rate loans.

Such mortgages would enable families to stay in their homes, it said.

The McCain plan would be available to mortgage holders who are living in the house as a primary residence, and who can prove their creditworthiness at the time of the original loan.

It suggested that the funds laid out in the 700-billion dollar Wall Street bailout plan approved by Congress on Friday could be used for this plan.