The difference between the rate at which banks lend to other banks and the rate at which they buy U.S. government debt has narrowed, but remains near a 25-year high — a glaring sign that there's still fear in the market. But there was a hopeful glimmer elsewhere: A crucial short-term, bank-to-bank lending rate called the London Interbank Offered Rate, or Libor, inched down Tuesday. That rate is important because a lot of commercial loans and many adjustable-rate mortgages are tied to it.

Some of the banks had to be pressured to participate by Paulson, who wanted healthy institutions to go first as a way of removing any stigma that might be associated with banks getting bailouts. Paulson met privately with bank executives on Monday.

The government's shares will carry a 5 percent annual dividend that will increase to 9 percent after five years. That increase in the rate is aimed at providing an incentive for companies to buy the government out. The advantage to the taxpayer is that if the rescue plan works, then the shares can be sold for more than the government initially paid, providing a profit on the transaction.

The move, in effect a partial nationalization of the banking system, does put the United States in the awkward position of owning shares in institutions it also regulates. The shares purchased by the government will be nonvoting. They also give the government a priority in getting paid back if a company fails.

So far this year, 15 banks have failed, compared with three for all of 2007.

"The government's role will be limited and temporary," Bush pledged. "These measures are not intended to take over the free market but to preserve it."

At a news conference last month, Bush defended his administration's increasingly aggressive market interventions to deal with the worst financial crisis in more than a half-century.

"I'm sure there are some of my friends out there saying, I thought this guy was a market guy; what happened to him? Well, my first instinct wasn't to lay out a huge government plan. My first instinct was to let the market work until I realized, upon being briefed by the experts, of how significant this problem became," Bush said then.

The Federal Reserve, meanwhile, announced that it will begin buying vast amounts of short-term debt on Oct. 27 — its latest effort to break through a credit clog. The Fed is invoking Depression-era emergency powers to buy commercial paper — a crucial short-term funding that many companies rely on to pay their workers and buy supplies. Last week the Fed said it intended to take the action but didn't specify when.