Meeting G7, Bush Vows World Economic Fix

"We are developing strategies to use the authority to purchase and insure mortgage assets and to purchase equity in financial institutions, as deemed necessary to promote financial market stability," Paulson said.

After addressing the media, President George Bush talks with his hosts during his visit to the...

After addressing the media, President George Bush talks with his hosts during his visit to the Islamic Center of Washington, D.C. Sept. 17, 2001. "And it is my honor to be meeting with leaders who feel just the same way I do. They're outraged, they're sad," said the President during his remarks. "They love America just as much as I do.".

(White House photo by Eric Draper)

Socialist Economic Policies?

As of now, banks themselves have lost faith in the system -- unwilling to lend to one another because they're unsure they'll get their money back. The U.S. plan to buy equity in these institutions is supposed to ease concerns and get money moving again. This option was laid out in the $700 billion rescue package approved by Congress. And while it smells of socialism to some, experts agree it's the last best option.

Sandeep Dahiya, associate professor of finance at the Georgetown University Business School, said that while having the federal government buy equity does not sit with well with him as a free market economist, he believes that "we are at the last resort."

Related

Dow-ner: Bush Speaks, Stocks Drop

The Stock Market Crash of 2008

GM Says It's Not Headed for Bankruptcy

"We are past ideology, we are fighting fires at this point," he said. "It doesn't matter whether you are a free economist, a socialist call it what you want but we have a tremendous crisis of confidence at this point."

Dahiya said government stepping in may help jump start the fledgling credit market.

"They are delivering ever more powerful shocks and hoping to get the life going and hopefully one shock will be large enough that will unclog those credit channels," he said.

Paulson didn't give details of the G7 action plan but many are hoping that just having a plan will be enough to boost confidence and restore the world's trust in financial markets.

Paulson and Bush will meet with officials from the Group of 20 countries — which include the G7 and the world's largest developing nations such as China and India — this evening. While the White House and Treasury continue to try to put out fires this weekend, they are tempering expectations for any grand plan that will solve the world's financial woes.