World leaders vow to battle economic crisis

The IMF's Dominique Strauss-Kahn: Future action will be needed by world economic powers.

WASHINGTON (CNN) -- World leaders, warning of a global economic downturn, pledged Saturday to work together to find solutions to what is unfolding as the worst financial crisis since the Great Depression.

U.S. President George W. Bush and finance officials from the Group of Seven, Group of 20 and the International Monetary Fund -- gathering in the nation's capital -- vowed vigilance in helping economies around the world on the road to recovery.

Concerns about the solvency of banks and financial institutions in recent weeks "had pushed the global financial system to the brink of systemic meltdown," said Dominique Strauss-Kahn, IMF managing director.

Strauss-Kahn said steps taken so far by the United States and European nations hadn't been fully effective and that more would be necessary in "the coming months."

For his part, Bush did not announce any new actions to stem the financial panic gripping the world, but reiterated measures world leaders are taking to strengthen financial systems.

"We recognize that the turmoil in the financial markets is affecting all our citizens," Bush said early Saturday morning. "All of us recognize this is a serious global crisis that requires a serious global response for the good of our people."

Both Bush and U.S. Treasury Secretary Henry Paulson spoke about the latest step being contemplated by the United States -- injecting much-needed capital into banks.

"In recent weeks, financial market turmoil intensified throughout the world and credit markets froze, causing a chain reaction resulting in non-financial companies experiencing difficulty in financing normal business operations," Paulson told an IMF meeting.

The Bush administration is considering whether to use the authority granted in the $700 billion rescue plan enacted on Oct. 3 to take ownership stakes in financial institutions to stabilize and restore confidence in them.

Other countries are also taking action to inject liquidity, protect citizens' savings and strengthen financial institutions in their own nations, he said.

Finance leaders from the world's top economies, the Group of Seven, pledged Friday night to take steps to keep leading institutions afloat, unfreeze credit, and ensure banks have enough capital to kick start lending and safeguard depositors' funds and restart the secondary markets for mortgages and other securitized assets.

Bush said that it is vital that countries work together so that their actions don't undermine others. He pointed to the emergency interest rate cut enacted this week as an example of a coordinated effort.

He plans to expand discussions beyond the G-7 ministers -- representing the United States, Britain, Canada, France, Germany, Italy, and Japan -- to the leaders of the G-20 emerging market and industrialized nations.

"We're in this together, we'll come through this together," the president said.

But Bush warned that it will take time to see the results. So far, all the measures world leaders have taken have done little to calm jittery markets.

"The benefits will not be realized overnight," he said.

Bush made a surprise visit Saturday at a G-20 meeting of finance ministers and central bankers.

Officials of the G-20 issued a statement late Saturday saying that the "global implications" of the crisis required international cooperation.

The G-20 is made up of rich and emerging nations that produce 90 percent of the world's economic output. The meeting in Washington came at Paulson's request. Federal Reserve Chairman Ben Bernanke was also in attendance.

IMF backs G-7 commitment

The IMF endorsed the G7's commitment to do everything possible to jumpstart the world's economies.

The IMF's Monetary and Finance Committee said in a statement that it "recognizes that the depth and systemic nature of the crisis call for exceptional vigilance, coordination, and readiness to take bold action."

Strauss-Kahn, of the IMF, said the downturn could be worse than anticipated.

"The world economy is now entering a major slowdown as a result of the most severe shock to mature financial markets since the 1930s, adding to pressure on global economies from high prices for oil and other commodities," Strauss-Kahn said.

The International Monetary and Finance Committee -- the steering arm of the IMF-- began its 18th fall meeting Saturday. The 185-nation IMF was created in 1945 to coordinate international financial stability efforts, aiming to avoid financial collapses.

The World Bank, which is a similar organization with a slightly different mandate, also started its fall meeting Saturday. It focuses on longer-term aid for troubled countries, investing in such things as infrastructure development.

Week of fear

The meetings in Washington cap a week in which fear gripped financial markets worldwide. The Dow Jones industrial average had its worst week ever, falling just over 1,874 points, or 18 percent. Wall Street lost roughly $2.4 trillion in market value during the week, according to losses in the Dow Jones Wilshire 5000, the broadest measure of the market.

Since the mid-September collapse of Lehman Brothers sparked the latest chaos in the financial markets, Bush has repeatedly tried to reassure the Americans.

"We can solve this crisis -- and we will," said Bush, in a speech at the White House Friday, his 27th commentary on the nation's financial health.

"Here's what the American people need to know: The U.S. government is acting, and we will continue to act, to resolve this crisis and return stability to our markets," he said.

The government has started taking a number of steps to attack the crisis, Bush said Friday. These include helping homeowners to refinance into more affordable mortgages; cutting the target for the federal funds rate; unveiling a plan to support the market for commercial paper; and offering government insurance for money market mutual funds.

The plan will authorize the Treasury to buy bad mortgage-related investments from finance companies, unfreezing the credit markets by freeing up banks and finance firms to lend once again.