Leaders meet to plan a financial rescue

— -- Wall Street, desperate for a way out of a deepening financial crisis that has wiped out $3 trillion in stock value this year, appears to be betting that the government will ride to the rescue with a major new bailout plan.

In a bullish sign for investors, lawmakers and top government officials met Thursday night on Capitol Hill and pledged to act quickly to find a solution to the financial sector's woes.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke met with Republican and Democratic lawmakers to discuss market conditions and address ways to stem the crisis. In a statement, they said they would search through the weekend for a solution.

"We're coming together to work for an expeditious solution which is aimed right at the heart of this problem," Paulson said.

"They are exploring all options, legislative and administrative," Treasury said in a statement.

Earlier in the day, the mere rumor of such major government intervention fueled a massive stock rally. The Dow Jones industrials — which had plunged more than 800 points in the previous three sessions — shot up more than 400 points. The worst financial crisis since the Great Depression has knocked the Dow down 17% this year.

Wall Street is hoping that the government will create an entity similar to the Resolution Trust Corp., created in 1989 to dispose of assets of hundreds of failed savings-and-loan institutions. Such an entity could take the bad assets off the books of troubled banks.

Regulators have been criticized for dealing with each crisis differently. The government, for example, refused to bail out Lehman Bros. last weekend, a decision that caused it to file for bankruptcy-court protection. But two days later the Fed put up $85 billion to keep giant insurer American International Group from failing.

Richard Yamarone, director of economic research at Argus Research, says the plan is likely to boost confidence. "There is a general acceptance that the government's plan will finally cage the wild beast," he says, referring to a credit crunch that is threatening the foundation of the financial system.