US markets react to Bush bank bail-out plan

US stock markets fluctuated today after the Bush administration said it was considering taking ownership stakes in a number of the nation's banks.

The move, which would aim to thaw the lending freeze that threatens to push the world's economy into recession, came after Britain's bank sector bail-out led to steady gains for London's leading share index.

US Treasury Secretary Hank Paulson said his department was moving quickly to implement the $700bn (€512.7bn) rescue package for the nation's economy, seen by many as a Wall Street bail-out, and specifically mentioned reviewing ways to bolster the capital of banks in a bid to ease the financial crisis.

In New York, the National Debt Clock near Times Square showed the scale of the problem as it ran out of digits.

The federal government's current debt stands at about $10.2 trillion (€7.4 trillion) and, as a short-term fix, the digital dollar sign on the billboard-style clock has been switched to the figure "1".

The late Manhattan real estate developer Seymour Durst put up the sign, which will be updated with an extra two digits next year, in 1989 to call attention to what was then a $2.7 trillion debt.

In a press conference on the financial crisis yesterday, Mr Paulson said: "We will use all the tools we've been given to maximum effectiveness, including strengthening the capitalisation of financial institutions of every size," he said.

Asked whether he would try something like the British plan, Mr Paulson said: "We have a broad range of authorities and tools.

"We've emphasised the purchase of liquid assets, but we have a broad range of authorities. And I'm confident we have the authorities we need to work with going forward.''

Mr Paulson said: "The turmoil will not end quickly and significant challenges remain ahead.

"US and global financial markets continue to be severely strained. Getting it right is as important as getting it done quickly."

He added that it would be several weeks before the programme makes its first purchases of troubled assets.

A Bush administration official said the rescue package passed by the US Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return. No decision has been made, however.

Investors were also hoping that selling, which gave the Dow its ninth straight day of losses, was overdone.