U.S. Treasury Secretary Henry Paulson says the government is working on
a plan to rescue banks from the bad debts at the center of Wall
Street's financial crisis.
Paulson said Thursday officials are working on a way to deal with what he called "the systemic risk and stresses" in U.S. markets. He said the approach will require legislation from Congress.
The Treasury secretary spoke to reporters alongside Federal Reserve Chairman Ben Bernanke and House Speaker Nancy Pelosi, following a late-night meeting in Pelosi's congressional office.
Senate Majority Leader Harry Reid said he expects the Bush administration will send a proposal to lawmakers in a matter of hours.
The president discussed the situation earlier Thursday with Paulson, Bernanke and Securities and Exchange Commission Chairman Christopher Cox.
U.S. stock market indexes soared about four percent late Thursday following reports of the government's plans.
It was the biggest one-day percentage gain for the indexes in six years and nearly recovered the steep losses of the previous day.
In a letter to Mr. Bush Thursday, Pelosi called for another economic recovery package, saying Congress stands ready to meet beyond its planned adjournment on September 26 to consider legislation related to the financial crisis.
News reports say the government's plans could involve an entity similar to one created during the savings and loan crisis two decades ago.
Earlier in the day, fears of a global financial meltdown forced the U.S. Federal Reserve and other major central banks to pump hundreds of billions of dollars into the world's financial markets. The banks hoped the move would help restore the confidence of investors.
Earlier this week, the Federal Reserve gave an $85 billion emergency loan to bail out the world's biggest insurance company, American International Group (AIG). AIG nearly collapsed after major losses in the housing crisis.