Probe finds Palin abused her power

CHILLICOTHE, Ohio (Reuters) - An Alaska ethics inquiry found on Friday that U.S. Republican vice presidential candidate Sarah Palin abused her power as the state's governor, casting a cloud over John McCain's controversial choice of running mate for the November 4 election.

At the same time, McCain shifted his strategy. After a week in which his campaign tried in vain to seize the momentum from Democrat Barack Obama with fierce personal attacks, he adopted a conciliatory tone, calling on supporters to respect the Illinois senator.

The Alaska inquiry cantered on whether Palin's dismissal of the state's public safety commissioner, Walt Monegan, was linked to her personal feud with a state trooper who was involved in a contentious divorce with the governor's sister.

A report prepared for the state Legislative Council said Monegan's refusal to fire the trooper was not the sole reason he was dismissed but was likely a contributing factor. The McCain-Palin campaign had said the commissioner was fired because of poor performance.

"Governor Palin knowingly permitted a situation to continue where impermissible pressure was placed on several subordinates in order to advance a personal agenda, to wit: to get Trooper Michael Wooten fired," the report said.

The scandal known locally as "Troopergate" gained national attention after Palin, who was little known in other states and has virtually no national or international experience, was selected to be McCain's running mate .

McCain campaign dismissed the report, saying it was a "partisan-led inquiry run by Obama supporters," and Palin and her family had been justified to be concerned about the behaviour of the trooper.

Palin "acted within her proper and lawful authority in the reassignment of Walt Monegan," the campaign's statement said.

McCain made clear the shift in his approach during a rally in Lakeville, Minnesota, when a questioner urged him to be a fighter at the next debate with Obama, reflecting a belligerence that has marked his recent appearances.

McCain replied: "I will, sir. ... We want to fight and I will fight. But we will be respectful. I admire Senator Obama and his accomplishments."

Responding to another voter who expressed fear of an Obama presidency, the Arizona senator disagreed, saying, "He is a decent person and a person you do not have to be scared (of) as president of the United States."

Attacks by McCain and Palin have failed to stop a gradual increase in Obama's lead in polls as he focussed on policies to cope with the international financial crisis.

The campaign has been overshadowed by the escalating international financial crisis after gut-wrenching drops on Wall Street and other stock exchanges.

The economic crisis is playing to Obama's strengths, with a majority of Americans telling pollsters they trust him more than McCain to handle economic issues.

Campaigning in battleground states key to the election, both candidates offered proposals to try to ease the strain on Americans from the market meltdown that has cost investment portfolios billions of dollars.

Obama, in Ohio, called for a plan to help small businesses hampered by the U.S. credit crunch to get the loans they need for operating expenses and payrolls. He urged financial ministers from the world's largest economies meeting in Washington this weekend to take coordinated steps to address the crisis.

"In this global economy, financial markets have no boundaries. So the current crisis demands a global response," said Obama, who leads McCain in opinion polls with 25 days until the election.

McCain called in Wisconsin for steps to protect older investors from rules that require them to begin selling off stocks from their IRA and 401(k) retirement portfolios when they reach 70 1/2 years old.

"To spare investors from being forced to sell their stocks at just the time when the markets are hurting the most, those rules should be suspended," the Arizona senator said.

Tensions simmered between the two camps.

A day after McCain brought up Obama's ties to former left-wing radical William Ayers, who is now a professor in Chicago, Obama accused the McCain camp of launching "a barrage of nasty insinuations and attacks.

"It's easy to rile up a crowd by stoking anger and division," Obama said. "But that's not what we need right now in the United States. The times are too serious. The challenges are too great. The American people aren't looking for someone who can divide this country -- they're looking for someone who will lead it."

Obama leads McCain 48 percent to 43 percent among likely U.S. voters in the latest Reuters/C-SPAN/Zogby poll, up slightly from a 4-point advantage for Obama.

(Additional reporting by Matt Spetalnick; Writing by Philip Barbara; Editing by David Storey)