Leaders from the world’s eight wealthiest countries pledged Wednesday to coordinate efforts to shore up their slumping national economies in order to avert a global recession.
The Group of Eight nations also agreed to meet soon with other “key countries” to hammer out an agenda for a plan to avoid future financial market meltdowns.
In a statement from the leaders of Canada, France, Germany, Italy, Japan, Russia, Britain and the United States, as well as the president of the European Commission, the countries said they are united in our commitment to fulfill our shared responsibility to resolve the current crisis, strengthen our financial institutions, restore confidence in the financial system, and provide a sound economic footing for our citizens and businesses.
The joint statement, issued by the White House, came five days after the group of nations known as the G-7 (the G-8 excluding Russia) pledged to take action to thaw frozen credit markets and encourage banks to lend to each.
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We will implement these measures on an urgent, transparent, and non-discriminatory basis, the G-8 nations said Wednesday. We pledge continued close cooperation and coordination.
President Bush also on Wednesday tried to allay concerns that the federal government was becoming too intrusive into the private sector, saying that his administration’s extraordinary actions of investing in troubled financial institutions would save the free market and revive the economy.
“It’s very important for the American people to know that the program is designed to preserve free enterprise, not replace free enterprise,” he told reporters before a briefing with his cabinet about the administration’s plan to help rescue Wall Street.
He stressed that his administration’s plans — which have been approved by Congress — are temporarily and will be lifted as soon as possible.
The president spoke one day after announcing that the government would pump up to 250 billion dollars into banks and offer new guarantees to help restore credit flows — the latest effort in the battle against a loss of global confidence.
Nine large banks, including Citigroup, JPMorgan Chase and Goldman Sachs, agreed to give the government stakes in exchange for new capital, as the US partly nationalizes banks for the first time since the Great Depression.
Mr. Bush added that the program is limited, and would limited and would buy only a certain number of shares in individual banks. These banks will continue to be operated privately controlled.
These are extraordinary measures, no question about it. But they’re well thought out, they are necessary, and I’m confident in the long run this economy will come back, Mr. Bush said.
The presidents comments came on the heels that JPMorgan Chase & Co., the largest U.S. bank by market value, eked out a third-quarter profit as the takeover of Washington Mutual Inc. cushioned about $5.8 billion of writedowns, losses and credit provisions.
But Federal Reserve Chairman Ben S. Bernanke cautioned that government efforts to calm financial markets and stem the credit crisis probably won’t result in an immediate economic rebound.
“Stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away,” Bernanke said today in a speech to the Economic Club of New York. “Economic activity will fall short of potential for a time.”
U.S. stocks slid Wednesday afternoon, as the Dow index was down 548.22 points, or 5.89 percent, to 8,762.77 points by 2:20 p.m. The Standard & Poor’s 500 Index fell 65.79 points, or 6.59 percent, to 932.22, while the Nasdaq Composite Index dropped 102.23 points, or 5.75 percent to 1,676.78 points.
Many Asian stock markets were mixed Wednesday. Japan’s Nikkei 225 Stock Average rose, reversing an early decline, as investors sought companies whose earnings are resilient against an economic slowdown.
But Hong Kong’s stocks fell, after the benchmark index posted its biggest two-day jump in more than a decade, on concern mainland Chinese companies will report lower profits and after crude oil prices dropped. And Singapore’s Straits Times Index lost 68.92, or 3.2 percent, to close at 2,059.39, following a two-day, 9.2 percent rally.