Goldman Injects $2 Billion Into Fund

NEW YORK, Aug. 13 -- Goldman Sachs, Wall Street's most profitable investment bank, said Monday that it is injecting $2 billion into one of its struggling hedge funds, underscoring the intensity of the turmoil in credit markets and its potential reach into the U.S. economy.

The fund shed about 30 percent of its value in last week's trading, shrinking to $3.6 billion from about $5 billion in a matter of days. Goldman's Global Equity Opportunities Fund is the latest hedge fund to acknowledge big losses in recent weeks as problems in the mortgage industry spread to other parts of the credit market and to stocks.

Problems with tightening credit have been plaguing financial institutions around the globe, prompting central banks in the United States, Europe and Asia to pump billions of dollars into the financial system to keep it operating smoothly.

On Monday, global stock markets steadied as the European Central Bank injected another $65 billion into the financial system -- its third such move in as many trading days -- and said the demand for cash among banks seemed to be "normalizing" after a few jittery days. The Bank of Japan provided another $5 billion, and the Federal Reserve followed with a $2 billion infusion. The amount was relatively small, disappointing some on Wall Street. But it was also seen as an indication that the Fed did not anticipate more trouble.

Bush administration sources said they are assessing the need to speak publicly on the credit crunch, lest too many voices create confusion or prompt retail investors to think the problems are deepening.

Instead, authorities are keeping their public comments to a minimum even as Treasury Department and Federal Reserve Board officials are reaching out privately to lenders, brokerages, banks, credit rating agencies and other market participants for real-time data about the size and scope of the situation.

Representatives for the Treasury Department and the White House declined to comment Monday on reports that Treasury Secretary Henry M. Paulson Jr. convened a meeting at his Washington home Sunday. Paulson often works through the weekend and sometimes convenes meetings there, sources said.

Members of the President's Working Group on Financial Markets, including the Treasury, Fed, Securities and Exchange Commission and Commodity Futures Trading Commission, are in touch regularly via staff members and telephone.

The markets kicked off somewhat calmer Monday in Asia, where the region's stocks were mostly higher. Hong Kong's Hang Seng index rose about one-half of a percent, and Korea's Kospi gained more than 1 percent. In Europe, where the decision to freeze two French investment funds last week touched off a global stock rout, the London FTSE 100 added nearly 3 percent. Exchanges in France and Germany rose by about 2 percent.

U.S. stock markets at first rallied modestly but gave up their gains in late trading as nervous investors sold off, unconvinced that the storm had passed. Major indicators finished the day flat. The early boost in stocks was also helped by better-than-expected consumer figures from the Commerce Department, which reported that retail sales in July rebounded after a June downturn, rising 0.3 percent on a seasonally adjusted basis compared with the month before.

The Dow Jones industrial average of blue-chip stocks lost 3.01 points, to 13,236.53. The tech-heavy Nasdaq shed 2.65, to 2542.24. The Standard & Poor's 500-stock index, a broad market measure, lost 0.72 points, to 1452.92.

The telecom sector fared best. Financial shares were initially helped by news from Goldman but finished the day slightly down.