Obama, McCain pledge to work together on reform

CHICAGO (Reuters) - President-elect Barack Obama and vanquished rival John McCain met for the first time since the November 4 election on Monday, pledging to work together to face the financial crisis and reduce government waste.

The two men were laughing and joking against a backdrop of American flags at Obama's presidential transition headquarters, a far cry from the bitter back and forth they engaged in during the campaign.

The two men, who clashed over economic and foreign policy as presidential candidates, agreed in their meeting on the need for reform on issues including climate change, immigration and defense procurement, a person familiar with the talks said.

The need to address the controversial U.S. prison in Guantanamo Bay, Cuba, was also discussed, as was the importance of bipartisanship and changing how Washington works.

"We're going to have a good conversation about how we can do some work together to fix up the country," Obama said before the two began their closed-door meeting, adding that he wanted to offer his thanks to McCain for "outstanding service" already rendered to the United States.

McCain, when asked generally whether he was hoping to help the Democratic president-elect, replied: "Obviously."

Obama has spent the period since his victory planning his transition to the White House and mulling candidates for his Cabinet after he takes over from outgoing Republican President George W. Bush on January 20.

REACHING OUT TO FORMER RIVALS

He has pledged to include Republicans in his administration and has reached out to his former Democratic rivals, including New York Sen. Hillary Clinton, who is a top contender for secretary of state.

McCain, a Republican Arizona senator, is unlikely to want or be offered an administration post but he promised in a gracious concession speech on November 4 to work with the president-elect.

Aides to Obama and McCain described their meeting as cooperative and cordial. The two men released a joint statement after their talks highlighting plans to work together.

"We had a productive conversation today about the need to launch a new era of reform where we take on government waste and bitter partisanship in Washington," they said.

"We hope to work together in the days and months ahead on critical challenges like solving our financial crisis, creating a new energy economy and protecting our nation's security."

McCain, a former Vietnam war prisoner, sharply criticized Obama during the campaign for his lack of foreign policy experience, tax-raising economic policies and association with a former 1960s radical.

Obama, in turn, accused McCain of planning to advance the policies of the unpopular Bush.

McCain, who lost his entourage of Secret Service officers and multiple staff when he lost the election, was accompanied by his close friend and colleague, Sen. Lindsey Graham of South Carolina. Graham called the meeting "a positive step forward" toward reducing battles between the two political parties.

Obama was joined by his chief of staff, Rep. Rahm Emanuel of Illinois.

FOCUS ON CABINET PICKS

Emanuel was the first major pick for Obama's White House team. With the United States facing two wars abroad and the expanding financial crisis, the president-elect is focusing on his choices for secretary of state and Treasury secretary.

He has been coy about the timing of such moves, saying only that one will come "soon."

Attention has focused on Clinton for secretary of state. As a former first lady, she would bring a high profile to the position at a time when improving America's image in the world is one of Obama's top foreign policy goals.

Obama said during the campaign he was intrigued by a book called "Team of Rivals," by Doris Kearns Goodwin, which describes how Abraham Lincoln consolidated power by bringing his opponents into his Cabinet.

One hurdle to choosing the New York senator would be avoiding any conflicts of interest posed by the various overseas philanthropic and business activities of her husband, former President Bill Clinton.

Obama also met last week with New Mexico Gov. Bill Richardson, a former rival for the Democratic presidential nomination, and is also reportedly considering Sen. John Kerry of Massachusetts for the nation's top diplomatic post.

For Treasury, Obama is considering former Treasury Secretary Lawrence Summers, New York Federal Reserve President Timothy Geithner, former Federal Reserve chairman Paul Volcker and New Jersey Democratic Gov. Jon Corzine, a former chief executive officer of Goldman Sachs.

Meanwhile Secretary of State Condoleezza Rice met with representatives from Obama's transition team to discuss personally the foreign policy handoff, her spokesman said.

(Additional reporting by Arshad Mohammed; editing by Todd Eastham)