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“The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence,” the president said.

At the top of the emergency night meeting on Capitol Hill, leaders in both parties said they were prepared to put their election-year squabbles behind them to pass a legislative solution soon.

“Now is not the time to seek political leverage or a quid pro quo. Too much is at stake for our families, workers, small businesses, and our economy,” said House Minority Leader John A. Boehner, Ohio Republican. “Congress should work with the administration in a bipartisan way to get our economy back on track.”

House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, said legislators have the goal of passing a plan authorizing Treasury to buy illiquid assets from banks before adjourning at the end of the month.

The Bush administration was preparing to present the plan creating a mechanism to resolve bad-debt problems within hours. Also being debated was the possibility of creating a new insurance fund for money market accounts.

That would address unprecedented problems erupting as a result of the severe credit crunch caused by Lehman Brothers’ monumental bankruptcy this week. A Putnam money market fund closed down Thursday, while others were facing a rash of redemptions by panicked investors worried about losing money on their accounts, which many people use like bank accounts but which are not federally insured.

Mr. Paulson said the overall solution would aim to ease the “illiquid debt” that is plaguing many financial institutions hit by declining property values. “What we are dealing with now is an approach to deal with systemic risk in our financial markets,” he said.

Treasury said it was open to various options Congress wants to pursue. Senate Banking, Housing and Urban Affairs Committee Chairman Christopher J. Dodd, Connecticut Democrat, said Congress may add to or subtract from the Treasury’s draft plan. He said it also should address the foreclosure crisis being faced by homeowners.

Leaders from Washington to Wall Street said they prefer congressional action over the disjointed actions that Treasury and the Fed took in recent days giving American International Group a loan but allowing Lehman Brothers to fail.

But in drafting such potentially contentious legislation, administration officials were concerned that it could fall victim to politics unless they had an agreement with congressional leaders to craft and pass a bipartisan plan.

“A big part of the problem right now in markets is confidence, and it would be a further blow to confidence” if election-year politics defeated efforts to resolve the crisis, said one source with knowledge of the matter.

The move toward a breakthrough in dealing with the long-running financial crisis came after a day of concerted moves by the United States and foreign governments to bolster confidence and pump cash into financial markets, which provided a breathing spell for battered markets.

The SEC announced stiff rules against short-selling of financial stocks and requiring disclosure of short sales by hedge funds that are thought to have been behind the spectacular decline of Lehman Brothers stock before its bankruptcy on Monday as well as troubles being experienced by Morgan Stanley, Goldman Sachs and others.

The new rules and cash infusion sent financial stocks soaring, with beleaguered shares of Washington Mutual, Wachovia and other banks rising by record amounts.

“The last 24 hours have been the most challenging for financial markets since World War II,” said Tobias Davis, an analyst at Custom House, a Canadian investment firm. The efforts by central banks helped to ease somewhat the virtual stall in lending that occurred earlier this week, he said.

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