Stocks Rally on Government Rescue Plan

"At present, it appears that unbridled short selling is contributing to the recent, sudden price declines in the securities of financial institutions unrelated to true price valuation," the SEC statement said.

Consumer and Taxpayer Confidence

Second, to stop Americans from panicking and pulling their money out of money market accounts, the Treasury announced this morning that it will back the value of all such funds so that investors can't take a loss.

"Money market funds play an important role as a savings and investment vehicle for many Americans; they are also a fundamental source of financing for our capital markets and financial institutions," the Treasury Debarment said in a statement. "Maintaining confidence in the money market fund industry is critical to protecting the integrity and stability of the global financial system."

In order to provide such money market insurance, the Treasury was forced to reach back to a Depression-era fund, the Exchange Stabilization Fund which was established by the Gold Reserve Act of 1934.

In the past few weeks, it became clear that the government wasn't doing enough to stop the economy from collapsing. Even the typically free-market Wall Street Journal editorialized that the government needed to do more.

In March, the government bailed out brokerage firm Bear Stearns but that did little to calm the markets.

Then in the past two weeks, the government again had to step in, this time rescuing mortgage giants Fannie Mae and Freddie Mac and then insurance giant American International Group. Those takeovers, along with the bankruptcy of Lehman Brothers and the fire-sale purchase of Merrill Lynch, still didn't put an end to the panic on Wall Street.

Then came word that money market mutual funds -- the most stable and conservative of stock market investments -- might actually be at risk of losing value. Policy and lawmakers decided it was time to act.

With reports from ABC News' Alice Gomstyn.

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