WASHINGTON Finance officials from the globe's major economic powers pledged Monday to do all they can to fight a worsening credit crisis that threatens the world's economic health and stability.
The Group of Seven, which held a conference call Monday morning, said they welcomed the extraordinary steps by the United States to stem the crisis, including a plan where the Treasury Department would buy $700 billion in bad mortgages and other toxic assets held by banks and other financial institutions. Those dodgy debts go to the heart of the crisis. The Bush administration and Congress are working on the plan, which could mark one of the biggest bailout in U.S. history.
Besides the United States, the Group of Seven is made up of Japan, Germany, France, Britain, Italy and Canada.
"We are ready to take whatever actions may be necessary, individually and collectively, to ensure the stability of the international financial system," the finance officials said in a statement.
The group didn't offer specifics about what actions they might take. But they sought to send a reassuring message that they are on top of the situation.
"We affirm our strong and shared commitment to protect the integrity of the international financial system and facilitate liquid, smooth functioning markets, which are essential for supporting the health of the world economy," they said.
A meltdown in the U.S. mortgage market started with problems involving "subprime" mortgages made to people with spotty credit or low incomes. Foreclosures hit record highs. As the problems spread to more creditworthy borrowers, hedge funds, banks and other investors in mortgage-backed securities took a huge financial hit, forcing some of the biggest names on Wall Street to go out of business, merge or revamp their structure. The troubles in the United States affected investors overseas too.
The next G7 meeting is Oct. 10 and the financial crisis described as the worst since the Great Depression will be the No. 1 topic for Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke and their overseas counterparts.
The Fed and other major central banks have taken coordinated action recently to pump billions into financial markets abroad in efforts to get credit flowing more freely again.
The United States, Britain and Germany also have taken steps to temporarily ban short selling against financial companies making a bet that stock prices will go down. Short selling involves borrowing a company's shares, selling them, and then buying them to return them to the lender later, when the stock falls. The short-seller pockets the difference in price. The practice has been blamed for aggravating financial turmoil.
G7 officials supported all these steps, saying they were critical actions aimed at stabilizing financial markets.