World Leaders Vow Concerted Action

Separately, Morgan Stanley battled rumors that the Japanese banking giant Mitsubishi UFJ might back out of its deal to inject $9 billion into the firm. Morgan Stanley's stock price plummeted more than 20 percent yesterday -- to less than a quarter of its value a month ago.

Stock markets fell broadly. At one point yesterday, the Dow Jones industrials fell below 8,000 for the first time since 2003. They had earlier crossed that level, on the way up, in October 1998. Stock markets also fell sharply abroad. In Japan, the benchmark index plunged 9.6 percent; in Britain, stocks tumbled 8.9 percent; in Germany, they fell 7 percent.

"What's been going on in the stock market in the last week or so has been the realization that the real economy can't function without functioning credit markets," said Steven Rattner, a managing principal of the Quadrangle Group, a large private investment firm.

The impact on consumers is widening. Interest rates on mortgage loans remain stubbornly high, in large part because Fannie Mae and Freddie Mac continue to pay inexplicably high prices to borrow money even though the two companies have been nationalized.

Major credit card companies are also reducing the amounts customers can borrow and raising interest rates and penalty fees. American Express typically reduces credit limits on about 4 percent of accounts each year; now the company is reducing limits on about 10 percent of accounts. Even the number of credit card offers shipped to American mailboxes has fallen about 15 percent since last year.

Businesses are getting hit, too. Capital One Financial said it would cut off the financing of the inventories of about 20 auto dealers in New York and New Jersey, dealing another blow to the reeling automobile industry.

Crude oil prices fell $8.89, to $77.70 a barrel, the lowest level in a year, on pessimism about the economic outlook.

The tremors being felt across the economy added a sense of urgency to the talks of the world's top finance ministers, a day before the regularly scheduled fall meeting of the International Monetary Fund and World Bank.

The finance ministers stressed their commitment to coordinating efforts to rescue banks.

"If there's one thing that's clear to me and clear to every member of the [Group of 20 industrial nations], it's that never have all of us been more dependent on each other and interconnected," Paulson said last night. "Growth or strength in any of these nations helps all of us; weakness hurts all of us."

"What will restore confidence is government intervention which is clear, comprehensive and cooperative among countries," said IMF Managing Director Dominique Strauss-Kahn. "The private sector cannot restore confidence on its own. Macroeconomic policy measures by governments will not restore confidence on their own. Piecemeal measures on financial markets will not restore confidence on their own." The finance ministers also pledged to rebuild the market for securitized assets, such as mortgages, that are blamed for sparking the financial crisis.

They said that each country was free to work within its own laws to implement the principles. "The actions should be taken in ways that protect taxpayers and avoid potentially damaging effects on other countries," the finance ministers said in their statement.