G-7 nations to prop up key banks

Finance ministers offer few specifics

The Group of Seven nations pledged to prevent the failure of key banks while stopping short of new initiatives to unfreeze credit markets.

"The current situation calls for urgent and exceptional action," the G-7's finance ministers and central bankers said in a 266-word statement after talks in Washington. Officials pledged to "take all necessary steps to unfreeze credit and money markets" without detailing how that would be accomplished.

With stocks falling and a global recession looming, the officials promised to ensure major banks have access to cash and are able to tap public funds for capital. By refraining from specific new measures, the G-7 fell short of some investors' calls for an agreement to guarantee loans between banks.

"Markets wanted to get a game plan from the G-7 and they haven't got that," said Sophia Drossos, a New York-based currency strategist at Morgan Stanley. "There might be disappointment."

Treasury Secretary Henry Paulson told reporters after the meeting it would be naive to think that different nations in different circumstances could come up with the same policy paths. He added that no banks were named in officials' discussions yesterday.

Ministers and central bankers from the US, Japan, Germany, United Kingdom, France, Canada, and Italy convened after stock indexes this month plunged more than 20 percent around the globe.

Also in Washington yesterday, Paulson said the Bush administration will move ahead with a plan to buy stock in financial institutions.

Paulson said the program will be open to a broad array of institutions and marks the first time the government has taken equity ownership in banks in this manner since a similar program was employed during the Great Depression.

He said the government's stock purchases would be of nonvoting shares so that the government will not have power to run the companies.

In Russia yesterday, Prime Minister Vladimir Putin said his government would start spending billions next week to buy shares on the Russian stock exchange to support one of the world's hardest-hit markets from the credit crisis.

After a week in which authorities suspended trading on the main RTS stock exchange repeatedly, Putin said $6.7 billion would be set aside to buy battered shares. The state development bank will place the orders, continuing a strategy that has essentially relied on making the government's oil windfall profits available to banks to encourage them to lend to companies or buy equity to maintain growth.

Both of Russia's major stock markets remained closed yesterday after Asian and European markets plummeted as confidence in the global financial system continued to ebb.