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Leaders Pledge Global Rescue

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The New York Times

Published: October 13, 2008

WASHINGTON - After a whirl of emergency meetings, government leaders on both sides of the Atlantic produced bold promises to rescue the global financial system, but were still racing to work out details to calm battered stock markets before they opened today.

Following the carnage in last week's markets, European countries pledged to inject capital into ailing banks and guarantee lending between banks - a step analysts called critical to easing a crisis of confidence and loosening the credit markets.

In the United States, officials said Treasury Secretary Henry Paulson was studying the feasibility of backing up loans between banks. Lending has slowed considerably because banks are concerned about being repaid should the other bank run into financial trouble.

The Treasury Department was not expected to announce anything before today, officials said.

The initial reaction of investors was positive, with stocks up in several Asian markets.

In Paris, European leaders agreed to a unified plan that would inject billions of euros into banks and guarantee bank borrowing for periods up to five years - with each nation's rescue plan, tailored to their national circumstances, to be announced simultaneously today.

Leaders of the 15 countries that use the euro did not put a price tag on any of their promises - contrary to Britain, where last week Prime Minister Gordon Brown announced $255 billion in government funds and other measures to stabilize its banks, or the United States, where a $700 billion bailout plan will be used partly to infuse banks with fresh capital.

The U.S. government has so far been reluctant to guarantee bank loans to other banks out of concern that it could give banks a competitive advantage over financial institutions, and thus have unintended consequences.

Europe may have acted quicker, in large part because banks there are facing urgent problems, said Tobias Levkovich, chief equity strategist at Citigroup. Many European financial firms have borrowed more extensively relative to their capital than most American banks.

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