The US government is preparing a sweeping bailout to mop up hundreds of billions of dollars in bad mortgage debt in an effort to bring stability to the financial markets.
The move caps a week in which financial markets faced their most serious confluence of crises since the Great Depression in the 1930s and threatened national economies and the worldwide banking system.
Lawmakers promised fast action on the bad debt plan, which two banking industry sources put in the $500-$800bn range. A Treasury spokeswoman declined comment.
US President George W Bush said government intervention was necessary to solve the problems plaguing the financial markets, calling it a pivotal moment for the US economy.
'Given the precarious state of today's financial markets and their vital importance to the daily lives of the American people, government intervention is not only warranted, it is essential,' Mr Bush said.
The US government has pledged more than $1 trillion to prop up the financial system and housing market.
In the most recent example of a government entity stepping in to ease fears, the US Treasury said yesterday it will use $50bn to back money-market mutual funds whose asset values fall below $1 in another step to contain raging financial turmoil.
Government officials said they had more work to do.
'We must now take further, decisive action to fundamentally and comprehensively address the root cause of our financial system's stresses,' Treasury Secretary Henry Paulson told a news conference.
'The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy.'
Mr Paulson and current Federal Reserve Chairman Ben Bernanke planned to work through the weekend with Congress on the bad debts plan.
Government officials have indicated their willingness to do what they can to prevent a major financial institution from going under and roiling the overall markets.
Banks worldwide have suffered more than $500bn of write-downs and loan losses since the global credit crisis began more than a year ago.
The crisis grew more acute this month with government takeovers of mortgage companies Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, Merrill Lynch & Co's shotgun agreement to be bought by Bank of America Corp and a bailout of insurer AIG.
This came just six months after a government-backed rescue of Bear Stearns Cos.
