A grim-faced President Bush acknowledged risks to taxpayers in what would be the most sweeping government intervention in financial markets since the Great Depression, but he declared, "The risk of not acting would be far higher."
The administration is asking Congress for far-reaching new powers to take over troubled mortgages from banks and other tottering financial institutions, including purchasing sour mortgage-backed securities. Administration officials and congressional leaders are to work out details over the weekend.
The administration could send a draft of the plan to Capitol Hill as early as Friday night, according to an official involved in the matter who spoke on condition of anonymity because of the sensitive nature of the work.
In further major steps, the Treasury Department and Federal Reserve moved to give money-market accounts the same kind of federal protection, at least temporarily, that now applies to savings and checking accounts and certificates of deposit at banks.
The spreading global selling panic had started to threaten some money-market funds, usually thought of as rock-solid investments. Administration officials feared a run on these funds, held by millions of Americans.
"Every American should know that the federal government continues to enforce laws and regulations protecting your money," Bush said at the White House. The 75-year-old Federal Deposit Insurance Corporation now insures savings and checking accounts and certificates of deposit up to $100,000.
Separately, the Securities and Exchange Commission acted to block short-selling in financial securities. That is a trading method that bets the value of stocks will go down. It has been blamed for accelerating the plunge in stock prices of banks and other financial institutions.
"This is a pivotal moment for America's economy," Bush said. "In our nation's history, there have been moments that require us to come together across party lines to address major challenges. This is such a moment."
Congressional leaders of both parties welcomed the administration's bold moves, after a series of ad hoc rescues.
The talk on the presidential campaign trail, barely six weeks before the election, was of bipartisanship, too.
Democrat Barack Obama said it was critical that leaders in both parties work in concert. "Truly, we are all in this together," he said.
GOP candidate John McCain said leaders should put aside partisan differences and "any action should be designed to keep people in their homes and safeguard the life savings of all Americans."
The federal government already has pledged more than $600 billion in the past year to bail out, or help bail out, some of the biggest names in American finance. That includes the rescue of investment bank Bear Stearns in March, the takeover of mortgage giants Fannie Mae and Freddie Mac earlier this month and the takeover of the world's largest insurance company, American International Group, just this week.
But the contagion continued to spread, bringing political consensus that drastic and comprehensive federal action was needed.
There are precedents for such a federal takeover.
The government created the Resolution Trust Corporation in the late 1980s to tackle the savings and loan crisis. It acquired the defaulted mortgages, foreclosed real estate and other assets of nearly a thousand failed S&Ls, restoring order and stability to the system. Resolving that crisis took six years and $125 billion in taxpayer money -- roughly equal to $200 billion in today's dollars.
And there was the Reconstruction Finance Corporation, a Depression-era relief program formed in 1932 by President Hoover that tried to revive the market by giving loans to banks and other businesses.
On Friday, Treasury Secretary Henry Paulson gave few details about the structure of the new program. Asked about an overall price tag, he said, "hundreds of billions" of dollars.
Congressional leaders said they were ready to move quickly but still needed details of the administration plan. For instance, there was no indication of what the government would get in return from financial companies for the federal assistance.
The ranking Republican on the Banking Committee, Sen. Richard Shelby of Alabama, predicted the bailout plan would cost at least half a trillion dollars.
House Banking Committee Chairman Barney Frank, D-Mass., said, "We want to make sure this is done in a way that maximizes our ability to reduce the number of foreclosures."
Paulson said the new troubled-asset relief program that he wants Congress to enact must be large enough to have the necessary impact while protecting taxpayers as much as possible.
"I am convinced that this bold approach will cost American families far less than the alternative -- a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson. "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."
Bush said simply, "We must act now."
"America's economy is facing unprecedented challenges. We're responding with unprecedented measures," Bush declared, standing in the White House Rose Garden with Paulson, Federal Reserve Chairman Ben Bernanke and Christopher Cox, chairman of the Securities and Exchange Commission.
Shortly after his remarks, Bush called congressional leaders with whom the administration will be working on the final plan. He spoke to Senate Majority Leader Harry Reid, D-Nev., House Speaker Nancy Pelosi, D-Calif., and Senate Republican leader Mitch McConnell of Kentucky. He planned to reach House Republican leader John Boehner later in the day.
The administration wants to see a package emerge from the weekend, to lend calm to Monday morning's market openings, said Keith Hennessey, the director of the president's economic council. The goal is to have something passed by Congress by the end of next week, when lawmakers recess for the elections.
Paulson said Fannie Mae and Freddie Mac will step up their purchases of mortgage-backed securities to help provide support to the crippled housing market.
He also said the Treasury Department will expand a program, announced earlier this month, to buy mortgage-backed securities, which have been badly hurt by the housing and credit crises.
"As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford," Paulson said.
Bush authorized Treasury to tap up to $50 billion from a Depression-era fund to insure the holdings of eligible money-market mutual funds. And the Federal Reserve announced it would expand its emergency lending program to help support the $3.4 trillion in total assets of the funds.
On Wednesday alone, investors had pulled more than $89 billion from money-market funds, according to iMoneyNet, publisher of the newsletter Money Fund Report.
The government's actions could help alleviate the uncertainty that has been sending the markets into tumult over the past week. Lending has come to a virtual standstill in the wake of the bankruptcy of Lehman Brothers Holdings Inc.
European Central Bank, Swiss National Bank and Bank of England also offered up more cash Friday. The three banks put a combined $90 billion into money markets.