MELTDOWN FLASHBACK: Saturday, Oct. 11, 2008

By The Associated Press

posted: 48 DAYS 5 HOURS AGO

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-President George W. Bush meets Saturday with finance officials from Japan, Germany, Britain, France, Italy and Canada. The message: The world's biggest economies are acting in concert to contain the meltdown.

"We will do what it takes to resolve the crisis and the world's economy will emerge stronger as a result," Bush says from the White House's Rose Garden. He says the nations must not "contradict or undermine" each other's actions through protectionism.

The International Monetary Fund and World Bank meet as well. The IMF endorses the G-7's plan to support banks, protect bank deposits and revive credit markets.

EPILOGUE:

On Monday, Oct. 13, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke call the leaders of the nation's nine largest banks to Washington. The government will invest $125 billion in their banks to stabilize the financial system, guarantee their senior debt and provide insurance for accounts used by businesses. Another $125 billion will go to smaller institutions.

The catch: Restrictions will be imposed on the pay and benefits received by executives whose companies receive equity investments from the government or sell it bad assets.

The bankers were told that no one could leave the meeting without agreeing to the terms. There was no negotiation.

Also Monday, the first trading day after one of the most tumultuous weeks in the history of financial markets, the Dow Jones industrial average soars 936 points, or 11 percent, to close at 9,388.

The rally marks the end of the previous week's slow-motion crash and the beginning of the end of the economy's free-fall that began five weeks earlier with the government's takeover of mortgage giants Freddie Mac and Fannie Mae.

But it's not the end of the story. The Dow doesn't hit its lowest point until March 9, 2009, when it closes at 6,547. And today, credit still remains tight for most businesses and consumers. The unemployment rate is at 9.8 percent and predicted to rise. Home foreclosures are stubbornly high. And consumers are still embracing a newfound thriftiness.

In those five weeks last fall, the role of government in business and the financial markets was redefined as the Treasury and the Fed threw money and programs at banks to stop the economy's accelerating downward spiral.

Those expensive actions were billed as a way to prevent a long, painful recession, and they may have prevented another Great Depression.

But they weren't enough to stop the Great Recession.

2009-10-10 13:29:01