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 the details to calm battered stock markets.
The initial reaction of investors was positive, with stocks up in several Asian markets and U.S. stock futures higher as well.
In the wake of the carnage in last week's markets, European countries pledged to inject capital into ailing banks and guarantee lending between banks — a step that analysts said was critical to easing a crisis of confidence and shaking loose the credit markets.
Europe's action throws the spotlight back to the United States, where officials said Treasury Secretary Henry Paulson was studying the feasibility of backing up loans between banks here. Lending between banks is considered vital to the smooth operation of the financial system and the broader economy.
This morning, Assistant Treasury Secretary Neel Kashkari, who has been tapped to orchestrate the bailout, is scheduled to give a speech on the giant rescue package.
In Paris, European leaders agreed to a unified plan that would inject billions of euros into their banks and guarantee bank borrowing for periods up to five years.
President Nicolas Sarkozy of France, who led the talks in the 18th-century Elysee Palace, said governments would announce concrete rescue plans, tailored to their national circumstances, simultaneously today.
"We need concrete measures, we need unity," Sarkozy declared. "That's what we achieved 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 now be used partly to infuse banks with fresh capital.
The United States is overhauling its rescue package, which had originally focused on buying distressed assets from banks. In a policy turnabout, Paulson said Friday that the government would now take equity stakes in banks.
The 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 other financial institutions, and thus have unintended consequences.
For Europeans, the agreement represented a sharp reversal from two weeks ago, when Germany and other countries played down the need for a concerted response to what some characterized as an American problem.
Belgian Finance Minister Didier Reynders said the European Central Bank had also committed to helping to restore trading in the commercial paper market, where companies conduct short-term borrowing. The United States also has agreed to guarantee commercial paper loans.
Also Sunday, Australia and New Zealand announced a blanket guarantee of bank deposits. Australia's prime minister, Kevin Rudd, called the financial meltdown "the economic equivalent of a national security crisis" because of the danger that funds would flee Sydney banks for countries where governments had guaranteed deposits. Australian stocks were up sharply in early trading today.
Fed okays Wachovia sale to Wells Fargo
The Federal Reserve approved Wells Fargo's $11.7-billion acquisition of Wachovia on Sunday, removing the deal's last major regulatory hurdle.
The Fed's move comes after federal antitrust regulators also moved swiftly to back San Francisco-based Wells Fargo's deal to buy the Charlotte, N.C.-based bank, approving it on Friday.
Citigroup Inc. walked away on Thursday from its efforts to buy Wachovia — which was hit by a $5-billion run on deposits in late September after the failure of Washington Mutual Inc., according to court documents filed by Citigroup.
In a brief statement Sunday, the Fed said it approved Wells Fargo taking on Wachovia Corp. along with all its banking and other units. Wells Fargo & Co. has said it plans to complete the deal by the end of the fourth quarter.
The acquisition still needs the approval of Wachovia shareholders.
Information from the Associated Press was used in this report.