Democrat Mark Warner (web|bio) and Republican Jim Gilmore elaborated on pursuing terrorists abroad and cracking down on Wall Street abuses at home in their second debate Thursday.

Neither U.S. Senate candidate scored decisive points before a select audience of business leaders and the political elite in their hourlong confrontation that dwelled mostly on the shopworn attacks on trust and taxes.

But dire headlines about historic market failures and the Taliban's growing strength in Afghanistan produced the debate's most pivotal moments.

With the Taliban strengthening its hand in Afghanistan and Islamic militants seeking shelter in Pakistan's neighboring wilderness, Warner called Pakistan an inconsistent ally and "the most dangerous nation, I believe, in the world at this point in terms of their potential threat."

Warner said Pakistan, a country with a nuclear arsenal, is a fearful flash point in the world as its new government attempts to find its footing. U.S. forces, Warner said, face a dilemma in pursuing Taliban fighters while still respecting Pakistani sovereignty.

"The challenge with the Pakistanis is one day they're helping us and the next they're indirectly funneling help to the Taliban," said Warner, who holds a commanding lead over Gilmore in polls and fundraising.

Gilmore seemed taken aback by Warner's comment.

"I think I would not sit here in an open forum today and say and describe the country of Pakistan as one of the great potential threats," Gilmore said.

Both candidates were clear that they believed American troops had the right to pursue militants who attack U.S. forces in Afghanistan to their hiding places across the Pakistani border.

In interviews later, Warner sought to temper his statement, saying he believes Pakistan is a tinder box, but "I don't think it is the most dangerous threat by any means."

Regarding the plunging stock market, both candidates called for grater regulation of Wall Street after the collapse of securities giant Lehman Brothers, the buyout of Merrill Lynch and the crisis at AIG, the nation's largest insurer.

"We have to have more oversight," said Gilmore, stating a position few in his party embrace. "CEOs should not be taking the benefits and the profits and the commissions and turn around when the market goes bad and walk away with a whole lot of money."

Gilmore also attacked Warner's path to wealth as a pioneer investor in the cellular telephone industry, calling Warner the beneficiary of a "massive government giveaway" who even in the early 1980s was well connected on Capitol Hill.

Gilmore didn't mention his own stake in a company tied to Bear Stearns that was set up to market some of the firm's highest-risk securities tied to the home mortgage industry meltdown. Warner didn't mention it either.

Warner said the failures were not solely the fault of Wall Street but "too many people asleep at the switch in Washington."

"Everyone was looking at the next quarterly profits and no one had a long term plan. If ever there was a time to send someone to Washington who can read a balance sheet ... it's now."

Traditional mortgages and a sound real estate market had anchored the U.S. economy for years, Warner said, but without a regulatory brake on greed, "you have 28-year-old MBAs making up (investment) products I don't think their CEOs even understood the ramifications of."

The candidates also supported recent congressional efforts to rewrite gun laws in the District of Columbia. Warner said he is a supporter of gun rights, and that congressional intervention is needed because the District City Council is trying to skirt a recent Supreme Court ruling that invalidated the city's handgun ban.

On transportation, Warner drew parallels to budget shortfalls that began under Gilmore's watch to nearly $3 billion in highway projects for which there was no state funding when Warner succeeded Gilmore as governor.

Gilmore, who frequently sought to tie Warner to Democratic presidential candidate Barack Obama (web|news|bio) on the issue of tax hikes, retaliated by noting that Warner engineered a $1.4 billion boost in state taxes in 2004, yet none of it was applied to easing the perpetual traffic gridlock in northern Virginia or Hampton Roads. The issue remains unresolved after a special legislative session, convened solely to fund new road projects and maintenance of existing highways, collapsed amid partisan gamesmanship in July.

Repeatedly, Warner reprised his attack on Gilmore as an anti-tax ideologue so rigid that legislators of his own party balked at his demand that his signature car tax phaseout proceed even with the budget facing a shortfall. And Warner said he is proud to support Obama, but will work as a senator in a bipartisan fashion.

Gilmore said on several occasions that bipartisanship is not enough.

"Bipartisanship, Mark, is no substitute for honesty," Gilmore said.