In an effort to expand the firepower the United States is bringing to the problem, Treasury Secretary Henry Paulson announced late Friday that it had decided to go forward with a plan to buy a part ownership in a broad array of American banks. It would be the first time the U.S. government has employed such a program since the 1930s.
President Bush invited Paulson and Federal Reserve Chairman Ben Bernanke and their counterparts from the other G-7 countries to come to the White House Saturday morning for a meeting that the administration hoped would demonstrate global resolve in attacking the current crisis.
Bush, speaking on the economic chaos for the 21st time out of the past 26 days, said Friday that the government's rescue program was aggressive enough and big enough to work. "We can solve this crisis and we will," he pledged.
The G-7 officials wrapped up three hours of closed-door talks Friday with one of the shortest joint communiques in the history of the group. It was also the most direct in its promise to take "all necessary steps to unfreeze credit and money markets" to end a severe credit crisis that began in the U.S. a year ago but since has spread worldwide and has grown in furiosity.
Fears that banking systems had essentially frozen up have sent worried investors rushing for the exits. The Dow Jones industrial average just completed its worst week in history and has plunged by nearly 2,400 points over the past eight trading sessions. Over the last year, investors have suffered $8.4 trillion in paper losses.
In the midst of all that carnage, the G-7 countries - the United States, Japan, Germany, France, Britain, Italy and Canada
- sought to strike a determined tone to do what they could to combat the problem in their countries.
The finance officials have already injected billions of dollars of reserves into their banking systems with little effect so far. As the markets plunged this past week, however, the U.S. and other countries accelerated their efforts.
The administration is working overtime to get a $700 billion rescue program that Congress passed just a week ago into operation. The program's main goal is to buy billions of dollars of bad mortgage-related loans from banks and other financial institutions in an attempt to restart more normal lending operations.
But on Friday, Paulson said the administration would open up a new avenue of attack with a program to purchase stock from a wide variety of banks and other financial institutions, hoping that by injecting fresh capital it will get credit
- the lifeblood of the economy - flowing again.
Earlier this week, Britain had moved to pour cash into its troubled banks in exchange for stakes in them
- a partial nationalization. Paulson said the U.S. program would be designed to complement banks' own efforts to raise fresh capital from private sources.
