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World Leaders Pledge Aid to Curb Global Financial Turmoil

As global markets try to steady themselves amid an economic crisis, world leaders pledged to pump billions of dollars into U.S. and European economies to allay the problems. A panel of financial experts discuss the move.

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  • JIM LEHRER:

    Now, we're ready to deal with today's big economic news, and we go to Jeffrey Brown once again for our financial crisis coverage.

  • JEFFREY BROWN:

    The coordinated European plan to spend up to $2 trillion to assist failing banks comes after several weeks of confusion among Europe's governments as the crisis mounted.

    British Prime Minister Gordon Brown first proposed this approach. His government will spend $86 billion to take equity stakes in British banks and guarantee transfers between institutions in hopes that banks will begin lending again and thaw frozen credit markets.

    GORDON BROWN, Prime Minister of Britain: In extraordinary times, with financial markets ceasing to work, the government cannot just leave people on their own to be buffeted about. For savers, for small businesses, and for homeowners, we must, in an uncertain and unstable world, be the rock of stability upon which British people can depend.

  • JEFFREY BROWN:

    The British action reportedly inspired the Europe-wide moves. Though there is an agreed framework for the cash infusions, each of the 15 nations involved will act independently on a national level.

    German Chancellor Angela Merkel announced her government's action this morning, which could pump as much as $670 billion into Germany's ailing banking sector.

  • ANGELA MERKEL, Chancellor, Germany (through translator):

    I know that we agreed to extensive, far-reaching, as well as drastic measures today. They have one goal: They shall help to create new trust, trust between the banks, trust in the economy, and the trust of the citizens, because trust is the currency that will be paid with.

  • JEFFREY BROWN:

    French President Nicolas Sarkozy pledged nearly $500 billion to his own country's effort. Sarkozy, who holds the rotating presidency of the European Union, said that the combined initiatives would outpace American actions to quell the credit crisis.

    NICOLAS SARKOZY, President of France (through translator): We will see tonight that really Europe, a united Europe, did better than the U.S. by the amounts they've pledged. And I also think the plan we are presenting is totally transparent. Through you, the French people will know exactly what we are doing and why we are doing it.

  • JEFFREY BROWN:

    For its part, the U.S. Treasury offered a framework this morning for the $700 billion rescue package passed by Congress 10 days ago. Neel Kashkari, the Treasury official in charge of the effort, laid out several available options.

    NEEL KASHKARI, Assistant Secretary of the Treasury: This team is working hard to define the requirements for those financial institutions so they can participate in one of three possible scenarios: first, an auction purchase, an auction of troubled assets; second, an equity program or direct-purchase program; or, third, in rare cases, the case of an intervention to prevent the impending failure of a systemically significant institution.

  • JEFFREY BROWN:

    Amid criticism that the U.S. has not focused on injecting capital straight into the banking system, as is now the case in Europe, Kashkari said that idea is very much in play.

  • NEEL KASHKARI:

    We are designing a standardized program to purchase equity in a broad array of financial institutions. As with the other programs, the equity program will be voluntary and designed with attractive terms to encourage participation from healthy institutions. It will also encourage firms to raise new private capital to complement the public capital.

  • JEFFREY BROWN:

    And after complaints that Treasury officials took too long to detail their plans, Kashkari said they were working quickly now and with many other players.

  • NEEL KASHKARI:

    Treasury is working with both domestic and international regulators to understand how best to design tools that will be most effective in dealing with the challenges that we face.

    For example, regulators are helping us to identify the quickest and most efficient method to purchase equity in financial institutions so they can resume lending.