U.S. Summons Banks to Meeting on Rescue Plan

— -- WASHINGTON (AP) -- The Bush administration summoned executives from leading financial firms to a meeting Monday to work out details of the $700 billion plan aimed at thawing frozen bank lending that is stifling the economy.

Treasury Department spokeswoman Brookly McLaughlin said officials from the Treasury Department and the Federal Reserve would participate in the meeting at the Treasury Department. The discussions are aimed at finalizing details on a financial market stability plan.

The administration's plan to implement the rescue package Congress passed on Oct. 3 could include the government taking partial ownership in banks and purchasing bad debt from financial companies.

President Bush said the plan will help banks gain access to capital and unfreeze credit markets.

"These are tough times for our economies yet we can be confident that we can work our way through these challenges and America will continue to work closely with the other nations to coordinate our response to this global financial crisis," Bush said following a meeting with Italian Premier Silvio Berlusconi.

The discussions in Washington came as Europe took swift, unified action to thaw frozen lending and get the global economy moving again.

Stock markets around the world rose. The Dow Jones industrials gained more than 500 points in a rebound from days of staggering losses. European markets rallied following Asia's lead in response to the widespread government initiatives.

The administration's interim bailout package chief, Neel Kashkari, said the government is moving quickly to implement the rescue program, including consulting with private law firms on how to buy stakes in banks to boost their cash reserves.

He spoke as The Bank of England, the European Central Bank and the Swiss National Bank jointly announced they would work together to provide unlimited short-term funds to make money available to ease the credit freeze. The Bank of Japan said it was considering a similar move.

To assist the European banks, the Fed said it was taking actions to assure enough U.S. dollar funds were available to meet demand.

"The government cannot just leave people on their own to be buffeted about," said British Prime Minister Gordon Brown.

European governments said they are putting nearly $2 trillion on the line to protect the continent's banks through guarantees and other emergency measures.

The Bush administration welcomed the moves in Europe, saying what was needed now was a strong effort to demonstrate the resolve of governments to deal with the problems.

"We must all act decisively, individually and collectively, according to our needs, to secure stability and growth for the world economic and financial order," Treasury Secretary Henry Paulson said in statement. His prepared remarks to the closing session of the 185-nation International Monetary Fund and World Bank were read by Assistant Treasury Secretary Clay Lowery. Aides said Paulson was too busy working on the rescue program to attend the closing day of the three-day discussions.

The administration on Monday announced the selection of a team of interim managers, picked an outside firm to help run the program and tapped Federal Reserve Chairman Ben Bernanke to head up the oversight board guarding against conflicts of interest.

Kashkari, the assistant Treasury secretary who is interim head of the program, said officials were developing the guidelines that will govern the purchase of bad assets and had consulted with six specialist law firms on how the government will take partial ownership of banks.

After those consultations, Kashkari said Treasury had chosen Simpson Thatcher & Bartlett LLP to move forward to help the government structure the stock purchase program.

"We are moving quickly -- but methodically -- and I am confident we are building the foundation for a strong, decisive and effective program," Kashkari said in a speech Monday to the Institute of International Bankers.

Kashkari, however, provided few details about how the program will actually buy bad assets and ownership shares in banks. He focused mainly on the nuts and bolts of getting the program running.

He said five veteran government officials had been chosen as interim heads of key components of the program including Tom Bloom, currently the chief financial officer at the Office of the Comptroller of the Currency, to serve as the chief financial officer for the rescue program.

Kashkari said seven policy teams at Treasury had been created to focus on the different aspects of the program including buying bad assets such as mortgage-backed securities.

Kashkari announced that investment consultancy Ennis Knupp & Associates had been chosen as the private firm that will help Treasury review proposals from asset management companies. He said that 70 companies had made bids to become the master custodian firm and that a final selection of the winning firm would be announced by Tuesday.

He said more than 100 companies had submitted bids to become one of the five to 10 firms that will operate the program to buy and manage the bad assets from financial firms.

Kashkari's speech Monday marked his first public appearance since being selected a week ago to run the program.

Paulson said during weekend meetings with global financial powers that his department was working around the clock to carry out the plan. His comments were meant to convince investors that the world's largest economy is moving quickly to get lending restarted and avert what could be a deep and painful global recession.

Those dire concerns sent markets around the world reeling last week, giving the Dow Jones industrial average it worst week on record. Since peaking a year ago, the Dow is now down 40.3 percent. U.S. stocks have lost $8.4 trillion in value over the past year.

Throughout the weekend, the administration worked to restore confidence, using the annual meetings of the 185-nation International Monetary Fund and World Bank to send a message that global finance officials will do what it takes to resolve the crisis.

The Group of Seven major industrial countries issued a five-point action plan that pledged to do everything from preventing major banks from failing to unfreezing credit markets.

The Bush administration over the past six weeks has taken over the nation's two biggest mortgage finance firms, Fannie Mae and Freddie Mac, rescued American International Group, the world's biggest insurance company, and won congressional approval of a $700 billion rescue package for the entire financial system.

As the bailout bill rushed through Congress, Paulson stressed that the major aim was to buy bad assets, primarily mortgage-backed securities, from financial institutions. The hope was that taking those bad loans off the books would encourage banks to return to more normal lending operations and unclog credit flows -- the economy's lifeblood.

Paulson said Friday that the government also would use some of the money to buy stakes in banks. The goal is to give banks the resources to resume lending at more normal levels.

That about-face has left the administration trying to decide how much to devote to buying bad assets and how much to use for stock purchases.

Lawmakers who pushed to include the stock purchase program in the rescue bill over initial administration objections say the stock purchases can start much faster than the effort to buy bad assets and help restore market confidence sooner.

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AP reporters Emily Flynn Vencat in London and Tim Paradis in New York contributed to this story.

(Copyright 2008 by The Associated Press. All Rights Reserved.)