WORLD> Global General
World powers pledge to combat credit crisis
(Agencies)
Updated: 2008-10-11 20:45

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.

Related readings:
 US bailout 'will be rolled out quickly'
 Italy to follow UK bailout plan
 Fuld: Where was Lehman's bailout?
 A bailout for failed investment bankers?
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 US 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 US program would be designed to complement banks' own efforts to raise fresh capital from private sources.

The G-7 statement endorsed a program to prevent the failure of major banks in each of the countries, unfreeze credit and money markets, bolster capital and deposit insurance programs and get the battered mortgage financing system operating more normally.

It was the meltdown of the subprime mortgage market with cascading defaults that triggered the start of the credit crisis in the United States in August 2007.

While the G-7 group did not endorse all the plans put forward, such as a proposal from Britain that countries guarantee the loans banks make to each other, the finance ministers said they believed they had agreed on a comprehensive plan that would show results.