(For other news from the Reuters Washington Summit, double click here)
* McCain sees "anger, frustration" over spending
* Says party needs to attract Hispanics
* Wants candidates suited for their states
By Steve Holland
WASHINGTON, Oct 21 (Reuters) - Republican Senator John McCain said on Wednesday his party needed a positive agenda to better attract those Americans who are disenchanted with Democratic policies.
McCain said he sensed "a lot of anger and a lot of frustration" among Americans over taxpayer-backed bailouts of banks and auto companies while they cope with a persistently high U.S. jobless rate of 9.8 percent and see bank executives get "obscene" bonuses.
McCain, who was his party's presidential nominee and lost the 2008 election to Democrat Barack Obama, spoke to a Reuters Summit in a roundtable interview with journalists.
McCain told of large crowds at protest rallies and town-hall meetings in his home state of Arizona.
"There's something going on out there. And I'd love to sit here and tell you that we Republicans are attracting all of those unhappy people, but we're not. They're out there kind of in the middle and they haven't found a home. And in fact they haven't even channeled their anger yet," he said.
McCain spoke as Republicans plot their strategy for trying to win seats in the U.S. House of Representatives and the Senate in 2010 elections, after suffering big losses in the 2006 and 2008 elections.
Republicans believe they can win back some seats in the 2010 vote that will be a referendum on Obama's presidency, while Democrats hope to hold their own by restoring economic growth and producing an overhaul of U.S. healthcare.
McCain said it appeared to him that many disaffected voters had swung "into the independent, angry category" rather than swinging over to Republicans.
"They're leaving the Democrats but they're not coming home to Republicans. And why aren't they coming home to Republicans? Well, we let spending get out of control for eight years," he said, referring to the period when Republican George W. Bush was president and government spending skyrocketed.
McCain said Republicans, accused by Democrats of being "the party of no," had in fact produced alternatives to Democratic proposals on stimulus spending and healthcare that had gained little news media coverage.
But he said Republican candidates running in 2010 needed to "portray a far more positive agenda for America" and that the party needed to recruit good candidates and attract Hispanic voters who have been heavily courted by Democrats. Hispanics are the fastest-growing minority in the United States.
Republican candidates should be suited to their states or districts, even though they may not be in lock-step with all elements of conservative ideology, he said.
He pointed to Republican Mark Kirk's bid for a Senate seat in Illinois and Republican Mike Castle's Senate race in Delaware. Both are moderates running in states that have often voted Democratic.
"We lost eight (Senate) seats in the last two elections. We've gone down from 55 to 40 in a hell of a hurry, so why don't we recruit candidates that are more suited to the constituency that they would be representing in our nation's capital?" he said. (For more on the Reuters Washington Summit, see [nN19208783]) (Reporting by Steve Holland; Additional reporting by Simon Denyer and Patricia Wilson; Editing by Peter Cooney) (For summit blog: blogs.reuters.com/summits/)