EU Leaders First to Back Banks

Oct. 12, 2008 -- All over the world this weekend, leaders raced to come up with a way to prevent another worldwide stock market nosedive Monday morning.

Late today in Europe, leaders came up with an emergency plan to rescue their banks, infusing them with cash in the hopes that they'll start lending again.

"It's not a matter of giving a gift to the banks," said French President Nicolas Sarkozy, defending the move.

A similar move was gaining steam in the United States, where former Treasury Secs. Lawrence Summers and James Baker appeared on ABC News' "This Week" with George Stephanopoulos to voice their support for the government's buying equity in the banking sector.

"This is bigger than the private sector can fix by itself. Government is going to have to restore financial stability to our markets and to our economy," Baker said in an exclusive interview with Stephanopoulos.

"And frankly, I think they have ... taken some pretty good steps already," he said.

But without Asia and the United States yet on board with a plan that compares to Europe's, some market watchers and economists are worried.

"I'm not sure it's going to be enough," New York Times columnist Andrew Ross Sorkin told ABC News' Bianna Golodryga. "I think what we really wanted was to see this concerted plan, and this global plan. Anything short of that is going to have people on edge. And in this market, fear is ruling the day."

The Bush administration has not yet signed onto a global plan. But it is radically re-thinking its own rescue plan.

Earlier in the week, Treasury Secretary Henry Paulson proposed that the federal government inject money directly into the banks and assume partial ownership.

"We've got a problem of trust. Financial institutions trusting each other. The whole economy trusting the government policy framework. And any time you have a problem of trust, you got to deal with it in a very aggressive way," Summers explained when asked about the need for a global coordinated action plan.

White House spokesman Tony Fratto said Bush acknowledged that the economic problem began in the United States, but told participants in an emergency Group of Seven meeting, "We're all in this together."

Bush said his administration was doing everything in its power to stave off the biggest market disruption since the Great Depression.

And while discussion of the financial crisis dominated at the G7, talk shifted today to the World Bank and its policy setting committee and concerns about how the fallout would affect developing and poor nations.