Presidential debate still up in air

OXFORD, Mississippi (Reuters) - The stage is set but it was unclear on Friday whether Republican John McCain would show up to duel Democrat Barack Obama in the first of three debates that could help decide a tight U.S. presidential race.

McCain's vow to skip the debate if a $700 billion rescue of the U.S. financial industry is not settled cast a shadow of uncertainty over the campaign as negotiators tried to persuade conservative Republicans in Congress to sign on to a deal.

Debate sponsors said the show would go on. Obama said he would be in Mississippi whether or not McCain goes. But it takes two to debate -- and without the Arizona senator, there would be no debate.

"John McCain wants to go to the debate tonight. But he believes that his first responsibility as a senator but also as an American leader ... is to be here, trying to put this together," independent Connecticut Sen. Joe Lieberman, a close McCain ally, told Fox News.

The debate is scheduled to focus on foreign policy and national security, although the turmoil on Wall Street has dominated the campaign trail for nearly two weeks and is almost certain to be discussed.

Both candidates spent the night in Washington and conferred with congressional leaders on Friday morning before bailout negotiations resumed. Obama was scheduled to fly to Mississippi at midday.

"Whether or not John McCain shows up, we will be down there. There will be an audience. There will be a moderator," Obama adviser Robert Gibbs said on MSNBC. "Maybe we'll answer some questions."

McCain waded into the negotiations after returning to Washington on Thursday. At the request of President George W. Bush, Obama joined McCain and Bush in a White House meeting with congressional leaders on Thursday but McCain aides said the meeting "devolved into a contentious shouting match."

Senior Democrats said McCain appeared to be backing a different plan than the Bush administration proposal under discussion for days. McCain aides said he did not endorse any plan and the Obama-led Democrats "did not seek to craft a bipartisan solution."

Obama said McCain's decision to return to Washington and participate in the bailout negotiations had injected a sour dose of presidential politics into the proceedings.

"POSTURING"

"It's not necessarily as helpful as it needs to be," the Illinois senator told reporters after the White House meeting. "There was a lot of glare, the spotlight, there's the potential for posturing or suspicions."

The potential no-show by McCain unsettled organizers at the National Commission on Debates, the hosts at the University of Mississippi, which spent about $5 million to accommodate the event, and the 3,000 journalists who descended on Oxford to cover it.

The first debate was expected to be watched by far more than the 40 million Americans who saw the convention acceptance speeches of McCain and Obama, and could be a crucial factor for undecided voters in the November 4 election.

Public opinion polls have shown Obama making gains over the past week on the question of who could best lead the country on economic issues, and most polls have him holding a slight lead over McCain.

Both camps have worked to lower expectations for their candidates in the high-stakes confrontation.

Obama aides have noted that national security and foreign policy is a strength for McCain, a 26-year veteran of Congress and a former prisoner of war in Vietnam. Opinion polls show voters favor McCain on security issues.

Earlier this week, McCain anticipated a tough debate by citing Obama's soaring rhetoric on the campaign trail and his victory in the Democratic nominating battle over Sen. Hillary Clinton of New York.

"He's very, very good. He was able to defeat Senator Hillary Clinton, who as we all know is very accomplished," McCain said earlier this week at an Ohio campaign stop. "He was able to, I think, with his eloquence inspire a great number of Americans. So these are going to be tough debates."

The second presidential debate is scheduled for October 7 and a third on October 15. The two vice presidential candidates -- Palin and Democratic Sen. Joe Biden of Delaware -- will debate on October 2.

(Editing by Patricia Zengerle)