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This week Morgan Stanley’s shares plunged nearly 40 percent in part because of short-selling.

Mr. Paulson and Mr. Bernanke met with congressional leaders Thursday night seeking their support for a massive bailout effort. The root cause of the stress in the capital markets is the real-estate correction, Mr. Paulson said.

At a press conference following the Thursday night meeting with Messrs. Paulson and Bernanke, House Speaker Nancy Pelosi said, We hope to move very quickly. Time is of the essence.

House Financial Services Committee Chairman Barney Frank said legislation could be drafted by his committee as early as Wednesday, in time for Congress to act quickly before its recess.

After European and Asian stock markets soared overnight in anticipation of the bailout plan, the Dow Jones Industrial Average jumped 325 points in Friday morning trading.