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As international leaders gathered here to deal with on the global financial crisis, the Bush administration embarked on a reform of its own strategy to rescue foundering financial system.
After two weeks to persuade Congress to let it take 700,000,000,000 U.S. dollars to buy mortgage securities and disturbed by the Bush administration has shelved the idea and replace it with a new approach by the direct injection of capital into the National Bank - part of the entry into force of the nationalization of Industry.
In a recent Sept. 23, senior officials have openly ridiculed the recommendations made by the Democrats take over the government’s stake in the bank.
Ministry of Finance strange working capital, to buy bank shares, which has become the main focus, has raised questions about whether it is a waste of precious time in an attempt to sell the plan to Congress, officials did not want to push forward.

It will also allow people to question the Bush Administration’s philosophy profoundly offensive, government-owned private companies hamper its ability to look at all options to stabilize the market.

Some experts also believe that the Ministry of Finance last month decided not to use taxpayers money to save the deterioration of Lehman Brothers, panic quickly transferred to an international crisis.

The Bush administration’s new emphasis on the last Friday announced that part of the rescue co-ordination with six of the world’s richest countries. It is in a week, the Dow Jones Industrial Average dropped by 18 percentage points in the worst week of stock market history.

Although the U.S. Treasury Department said it still plans to buy non-performing assets of the scope of the plan is still unclear. U.S. Treasury Secretary Paulson declined to say whether or not a small capital injection plan, the bank will be larger than the original plan to buy troubled assets.

However, the Ministry of Finance has instructed Fannie Mae and Freddie Mac, government-controlled mortgage giants to improve their difficult to sell to buy mortgage bonds, this may be a quick and less formal process, not the auction proposed by the Ministry of Finance.

To emphasize the seriousness of the situation, U.S. President George W. Bush convened a meeting early this morning at the White House Saturday the G-7 finance ministers of industrialized countries.

“We all recognize that this is a serious global crisis requires a serious response to global for the benefit of our people,” Bush said later in the Rose Garden, on both sides of the minister, who is in Washington for the annual meeting The International Monetary Fund and the World Bank.

Bush said that the country has agreed to the general principles of the response to crises, including work to prevent the collapse of major financial institutions to protect depositors and deposits. However, he did not provide details of other measures, indicating that there are still differences between countries have to take measures to support their respective financial systems.

To some extent, the efforts to reach a coordinated plan is being driven less by the hope that these measures will carry more punch than the fear that individual countries to take action could undermine the system.

These worries grew in recent days when seized, Iceland three major banks, it is a failure, it seems that the Icelanders to ensure that the deposits of these foreigners. This provoked a fierce reaction from the United Kingdom, Iceland is currently working with the credibility of a British citizen.

With the joint efforts of the United States and Europe means the protection of their banking system, economists are worried that money may flow to other countries, especially emerging markets, investors decided that if the Western countries, these markets are not safe.

U.S. attempts to pacify these countries last Saturday night at the G-20, including the major emerging market countries such as China and Russia.

“We would like to reiterate our commitment, we have to take such action, without prejudice to the country’s economic others, said:” David H McCormick, Under-Secretary-General of the Ministry of Finance for International Affairs.

Like the United States, Britain plans to provide funds directly to the bank. However, the United States and other countries have not adopted the recommendations of the United Kingdom, to guarantee loans between banks, in order to solve the credit market.

Germany has been reluctant to state-owned capital will go directly to the bank, but officials said there are signs of movement in this position last Saturday. EU leaders are scheduled to meet in Paris on Sunday reported that Germany might announce a plan to rescue itself.

Some experts said the Bush administration to delay the implementation of the 700,000,000,000 U.S. dollars for emergency relief plan will only hurt their prospects for success.

“Even if it is appropriate before it is not enough now,” said Frederick meter very, Professor of Economics, Columbia University Business School, who stepped down in the U.S. Federal Reserve governor by the end of August. “If you have a delay and uncertainty, the amount you have to put up with the need.”

Recently, on the idea in late September to allow the Government to buy part of the banking system can not imagine the Bush administration. Many officials, it seems that such an intervention in the European style of government intrusion of the market.

“Some people say that we should adhere to the capital of the bank, the bank preferred to take. This is what you have when you fail,” Paulson to the Senate Banking Committee on Sept. 23. “This is a success.”

Paulson told members of Congress made more meaningful boost to freeze the credit market “market” in which he means the acquisition of assets rather than institutions. He resolutely resist the Democratic proposal, asking the Government to obtain the shares in the company’s help.

But last Friday, Paulson not only confirmed his intention to buy the stake, but the idea of banks to the Central Clearing and Settlement. “We can make use of taxpayers money in a more effective and more efficient, more taxpayers dollars, if we are to develop a standardized procedure for the purchase of shares of financial institutions,” Paulson said.

Treasury officials said they hoped that the first capital investment over the next two weeks. This will be earlier than the government procurement do not need any of the mortgage securities. Paulson’s one of the reasons for the rapid review is that the global financial markets has been downhill faster than anyone ever seen before.

Credit markets, and captured all but stopped functioning, it is not possible for most companies to borrow money overnight basis of the above. Bank stocks fell, and thus more difficult to support its balance sheet to raise more capital investors.

Investors fear the House of Representatives rejected the initial relief bill on September 29. They are more alarmed, the U.S. Congress passed a bill on October 3 is full of sweetness, 110,000,000,000 U.S. dollars to increase the price tag.

To close last Friday, Standard & Poor’s 500 index suffered the worst week since 1933 since. A growing number of analysts believe that Paulson’s original plan, asked the troubled assets of the relief plan, it will be useless, it may not work. A number of speakers pointed out that the Congress Paulson put forward a proposal that is only three pages long and the Ministry of Finance officials also did not provide details of how the auction.

As envisaged, the Ministry of Finance or his agent will be held in the so-called “reverse auction” of the financial institutions were invited to compete with each other to provide the sale of its mortgage securities at a lower price.

Although the auction is a common variety of products, including power sold to another utility experts believe that mortgage securities will be difficult to cause headaches, as they are very complicated, difficult to value, and almost infinite variety.

The bonds into a single pool of mortgage loans are divided into more than a dozen “file”, or films, which have different qualifications, different credit ratings and different rules, are rewarded. The basic performance of the mortgage loans vary from one pool to another, even if the two by the pool appears to be similar to the loan.

“I do not know of any evidence to the Ministry of Finance’s auction a success, for their assets so heterogeneous,” said Poole, who retired in August as the Federal Reserve Bank of St. Louis.

Due to Fannie Mae and Freddie Mac mortgage giant, the purchase and sale of mortgage securities every day, they can be difficult to absorb some of the sale of securities without having passed the test of the auction process.

U.S. Federal housing finance agency, last month to seize the business and turn them into conservatorship, the lifting of restrictions on the capital last week and they effectively give them the green light to buy more mortgage securities of all types, including those supported by the Mortgage, in view of the borrower’s credit is weak.

The company has a lot of money; Congress authorized the Ministry of Finance to provide them with as many as 100,000,000,000 U.S. dollars, each part of the rescue plan, to create for them. This can free up funds separate 700,000,000,000 U.S. dollars capital injection plan to save directly to the bank. The person familiar with the situation as soon as possible systematic planning relief efforts, said Federal Reserve Chairman, Ben Bernanke, believe it will be easier and more efficient direct injection of capital into the bank. However, the Ministry of Finance officials refused, in part because they are ideologically opposed to direct government involvement in commercial activities.

However, as financial markets further downward spiral in the past 10 days, more and more top-level institutions, including Goldman Sachs and Morgan Stanley have become worried about their survival.

“The crisis of confidence, not a way beyond the actual loss will be incurred from debt securities,” chief economist Mickey Levy of Bank of America, said in an interview last Friday. “This is the bounden duty of the real decision-makers in resolving the crisis.”

Treasury officials began trying to persuade banks and investment companies the possibility of the government to buy their shares. The new legal aid given to the Ministry of Finance has the right to purchase almost any kind of assets that it wanted, including preferred stock or the bank.

Paulson said that the industry quickly, and they like the idea, but they warned that the Ministry of Finance should not try to crowd out existing shareholders. They also begged Paulson did not strict restrictions on executives pay and golden parachute deal who is in charge of the launch.

Paulson listen to those who plead guilty. In his speech last Friday, he carefully pointed out that the Government will be the only “attend” the company’s shares. Officials said that the law allows the Treasury to write most of the restrictions on their executives pay, and that such restrictions could be lighter if they apply for a relatively healthy company.