Markets applaud as financial rescue plan takes shape

WASHINGTON -- Stocks rallied strongly Friday after Treasury Secretary Henry Paulson and top elected officials pledged to expedite a rescue plan for the nation's troubled financial sector.

The Dow Jones industrial average gained 368.75 points or 3.35%, erasing the week's losses. Other major indexes also gained 3% to 4%.

House Speaker Nancy Pelosi said the House will stay in session past its scheduled adjournment next week if needed to deal with the crisis.

"We are committed to quick, bipartisan action," she said.

That assurance, and new measures announced earlier Friday to grease the nation's financial wheels helped propel the rally in stocks.

The rescue could involve government guarantees worth hundreds of billions of dollars, Paulson said. "This needs to be big enough to make a real difference," he told reporters Friday morning, arguing that doing nothing would cause great harm.

"I am convinced that this bold approach will cost American families far less than the alternative — a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," he said.

In a brief appearance later Friday morning, President Bush reiterated that the action is necessary.

"These measures will require us to put a significant amount of taxpayer dollars on the line," he said. "This action does entail risk, but we expect that this money will eventually be paid back."

Paulson said he, along with Federal Reserve Chairman Ben Bernanke, will work with members of Congress throughout the weekend to craft a proposal, which he referred to as a "troubled asset relief program."

Treasury and the Fed had been dealing with the financial crisis on a case-by-case basis. A coordinated effort is expected to calm individual investors and financial markerts and increase confidence, helping to bring financial markets and the economy back to a new normal.

"The Treasury and the Fed have finally realized the depth and systemic nature of the crisis," John Ryding and Conrad DeQuadros of RDQ Economics said in a statement to clients. "We believe that these actions will constitute the wider firebreak that will contain the crisis. ... However, we still think the economy is in recession— although these measures reduce the chance that the recession could become a depression."