U.S. stock markets plunged today (Wednesday) after disappointing
economic reports showed consumer spending declining and a tight credit
market hampering commerce.
Consumer spending drives about two-thirds of
the U.S. economy and
credit problems are blamed for hurting business and slowing the overall
economy. The best-known U.S. stock index, the Dow Jones Industrial
nearly eight percent, losing more than 700 points. European stocks were
off six percent or more at the close of trading. Leaders of the world's
major industrial countries say they will gather
"in the near future" for talks on the global financial crisis.
White House officials said today (Wednesday) that leaders of the Group
of Eight industrialized nations (including the United States, Japan,
Germany, France, Britain, Italy, Canada, and Russia) would work to
strengthen financial institutions and restore confidence.
The announcement came one day after U.S. President George Bush outlined
key parts of a plan to bolster the financial sector. The head of the
U.S. Federal Reserve, Ben Bernanke, said it will take some time to
solve the "large and complex" problems facing the economy. Treasury
Secretary Henry Paulson told television interviewers (on ABC and NBC)
he is confident the government rescue plan for the financial system
They spoke about a 250 billion dollar plan
for the government to buy
part ownership of some U.S. banks and guarantee more loans and
deposits. The U.S. plan is similar to efforts underway by major
European nations to restart the stalled credit market that is hampering
business and dragging down the economy.
Paulson said the government intervention will increase the money
available to private banks and encourage them to resume lending.
President Bush said these measures are temporary and intended to
preserve the free market, not replace it.
A wave of home loan defaults sparked the current financial crisis,
which included the collapse of several major financial institutions and
a plunge in world stock markets. The crisis spread because mortgages
were gathered into investment instruments and sold to investors around