WASHINGTON - Leaders of the world's most industrialized nations agreed Saturday to work together with the U.S. Treasury Department and international institutions to attack the widening financial crisis that threatens them all.
"There have been moments of crisis in the past when powerful nations turned their energies against each other, or sought to wall themselves off from the world. This time is different," President Bush said in a Rose Garden appearance.
"The leaders gathered in Washington this weekend are all working toward the same goals. We will stand together in addressing this threat to our prosperity. We will do what it takes to resolve this crisis. And the world's economy will emerge stronger as a result."
Although Bush did not criticize any nation, there has been plenty of finger-pointing of late. France has blamed the growing crisis on a U.S. decision to let investment bank Lehman Brothers fail in September. The 12-nation European Union failed to craft a coordinated response at a summit a week ago. And both Ireland and Germany promised to protect bank deposits, causing depositors in other nations to pour their money into banks in those countries.
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And important developing nations like Brazil and Mexico, who depend heavily on agriculture and oil exports respectively, have weathered the financial storm only to face an even bigger problem - a loss of revenue because of a global collapse in commodities prices.
After Bush held an early meeting with finance ministers from Canada, Japan, Italy, France, Germany, Britain and the prime minister of Luxembourg, Treasury Secretary Henry Paulson was dispatched to address the weekend of finance ministers at central bankers at the International Monetary Fund a few blocks up Pennsylvania Ave.
Paulson listed for them the many actions his agency and the Federal Reserve have taken to shore up the U.S. banking system and protect depositors. Despite those actions, stock markets at home and abroad posted what for many was their worst week ever.
"These extraordinary events require a global response and financial officials from around the world are working together, taking action individually and collectively as necessary, to address these challenges," Paulson told the gathered ministers. Late Saturday, he was scheduled to meet separately with leaders of the 20 most industrialized nations.
Meanwhile, in a strongly worded statement, the managing director of the IMF offered a grim summation.
"The financial crisis that originated in the collapse of U.S. subprime mortgage market in August 2007 has deepened further and is now affecting many parts of the global financial system," Dominique Strauss-Kahn said in a statement. "Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown since mid-September."
For weeks, the growing banking crisis has been described as a liquidity crisis, meaning financial institutions and corporations simply couldn't get access to capital. The IMF director's statement Saturday made clear that the problem now is becoming one of solvency, meaning many big banks and corporations are at risk of collapse.
Evidence of that was clear in the auto sector, where published reports Saturday said that General Motors Corp. had entered into talks about merging with or buying Chrysler LLC.
Chrysler is 80 percent owned by Cerberus Capital Management, a private-equity firm run by former Treasury Secretary John Snow. Cerberus also owns a 51 percent stake in GMAC, the finance arm of GM.
The Detroit News reported on its website Saturday afternoon that Cerberus is offering Chrysler's auto production business in exchange for getting the rest of GMAC, a profitable auto finance business that like many giant financial institution is suffering from bad bets on mortgage assets.
Ford is also looking to shed assets. The Wall Street Journal reported on its website Saturday that the U.S. automaker is exploring the sale of its controlling interest in Japanese automaker Mazda Motor Co.
Few industries are more symbolic than automakers of America's historic manufacturing might. But today, the Big Three are muddling through. Just weeks ago Congress slipped them $25 billion in low-interest loans to help Detroit retool for a more energy-efficient future. Those loans may now be in question as rumors swirl about a potential bankruptcy or industry consolidation.
GM stock plunged Thursday to levels not seen since the 1950's and Ford Motor Corp. has also seen its stock battered by investor fear of gathering recession clouds.
Automakers are not alone as financial problems are morphing out of banking into other vital sectors of the economy. Even corporate giants like General Electric are getting a come-uppance from panicked investors.
GE's stock traded down 25 percent this month, before jumping back 13 percent on Friday after an early release of third-quarter earnings calmed the waters. GE's stock slumped even after celebrated investor Warren Buffett bought $3 billion in preferred stock from the iconic appliance maker and innovation leader. It underscored how even the most revered companies are at risk in a panic environment.
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Paulson confirmed on Friday that the United States is considering taking an equity stake in some U.S. banks for the first time since the Great Depression.
Details of his proposal remain very sketchy but Paulson suggested that he'd seek protections for taxpayers like preferred stock but would not seek to take a controlling stake that involved the government in management decisions.
Paulson's shocking confirmation came days after Britain had already announced plans to take equity stakes in banks. It has been widely reported that Germany is expected to announce the same before or at an emergency summit Sunday of members of the 12-nation European Union.