By MARK LANDLER and EDMUND L. ANDREWS
The British and American plans, though far from identical, have two common elements according to officials: injection of government money into banks in return for ownership stakes and guarantees of repayment for various types of loans.
Both remedies will be center stage on Saturday, when President Bush meets with finance ministers from the world’s richest countries at an unusual White House meeting to swap ideas.
Mr. Bush’s invitation to finance ministers from Britain, Italy, Germany, France, Canada and Japan came on a day of phone calls and letters between European leaders and with Washington.
Adding to the urgency, the Japanese stock market plunged more than 10 percent Friday morning, after having dropped 9 percent on Wednesday.
Government officials struggled to fashion a coordinated response to the ailing global banking system before going to Washington for annual meetings of the International Monetary Fund and World Bank.
“As this thing has spread, the opportunities for cooperation have risen,” David H. McCormick, the under secretary of the Treasury for international affairs, said. “We need to promote and highlight these common areas.”
With credit markets still frozen and stock markets around the world in a deep swoon, there is a growing consensus that the crisis is now so fast-moving and harmful to the global economy that it demands an unprecedented degree of worldwide coordination.
The Treasury’s openness to direct infusions of cash is a remarkable change in tone from a few weeks ago, when the Treasury secretary, Henry M. Paulson Jr., and the Federal Reserve chairman, Ben S. Bernanke, discouraged such actions in testimony before Congress. “Putting capital in institutions is about failure,” Mr. Paulson declared on Sept. 23. “This is about success.”
Treasury officials, however, said the emphasis changed in the last week, largely because stock markets kept spiraling down.
Prime Minister Gordon Brown of Britain made the case, in a letter to President Nicolas Sarkozy of France, for another option gaining favor among economists — guaranteeing short- and medium-term loans between banks. By persuading banks to resume lending to each other, the plan aims to shake loose the paralyzed credit market. “This is an area where a concerted international approach could have a very powerful effect,” Mr. Brown said Thursday in the two-page letter.
Administration officials are discussing aspects of the British proposal but said different economies have different rules that complicate a single joint action.
One senior administration official argued that expecting an agreement on proposals like Mr. Brown’s would be “irrationally raising expectations.”
Still, recapitalizing the banks and jump-starting their lending are at the top of the list of remedies that many economists are now suggesting. By acting in concert, countries can maximize the punch of their actions, these experts said, while avoiding distortions that occur when countries go different ways.
“At a minimum, you want to curtail damage,” said Carmen M. Reinhart, a professor of economics at the University of Maryland. “You don’t want the beggar-thy-neighbor policies that characterized the Great Depression.”
“At a maximum,” she continued, “you can get general principles — the need for a swift recapitalization of the banks, the need for liquidity — so we don’t get an even bigger credit crunch.”
Dominique Strauss-Kahn, managing director of the International Monetary Fund, warned countries against taking actions that could destabilize the financial systems of their neighbors. Unilateral acts, he said, “have to be avoided, if not condemned.”
Mr. Strauss-Kahn announced that the fund had activated an emergency financing mechanism, which would allow it to lend money more quickly to countries facing financial problems, as a result of the crisis.
The White House confirmed that the Treasury Department was considering taking ownership positions in banks as part of its $700 billion rescue package. But officials said the idea was less developed than the plan to buy distressed assets from banks through “reverse auctions.”
The goal, Treasury officials said, is a plan that would be broadly available to all banks, rather than through specific rescue packages negotiated on a case-by-case basis. That makes it likely that the government could afford to take only a small stake in any single institution.
The direct injections of cash would be for comparatively healthy banks. If a bank is failing and needs to be rescued or shut down, the Federal Deposit Insurance Corporation would handle it through its own procedures.
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