by Calculated Risk on 10/10/2008 06:04:00 AM

Mark Landler and Edmund Andrews write in the NY Times: Nations Weighing Global Approach as Chaos Spreads

The United States and Britain appear to be converging on a similar blueprint for stemming the financial chaos sweeping the world, one day before a crucial meeting of leaders begins in Washington that the White House hopes will result in a more coordinated response.

The British and American plans, though far from identical, have two common elements according to officials: injection of government money into banks in return for ownership stakes and guarantees of repayment for various types of loans.

Here is the proposal from Prime Minister Gordon Brown in The Times: We must lead the world to financial stability.

However according to the NY Times article, it sounds like the U.S. has only begun to consider these options:

One senior administration official argued that expecting an agreement on proposals like Mr. Brown’s would be “irrationally raising expectations.”
...
The White House confirmed that the Treasury Department was considering taking ownership positions in banks as part of its $700 billion rescue package. But officials said the idea was less developed than the plan to buy distressed assets from banks through “reverse auctions.”

Less developed than the Paulson plan? That plan was never clearly explained.

The WSJ suggests: U.S. Weighs Backing Bank Debt

The U.S. is weighing two dramatic steps to repair ailing financial markets: guaranteeing billions of dollars in bank debt and temporarily insuring all U.S. bank deposits.
...
Under the U.K.'s recently announced plan, which it is now pitching to the G-7 members, the British government would guarantee up to £250 billion ($432 billion) in bank debt maturing up to 36 months. The British concept to expand its proposal to other countries has a lot of support from Wall Street and is being pored over by U.S. officials, according to people familiar with the matter.

Professor Krugman calls this weekend a Moment of Truth:

[K]ey policy players have largely wasted the past four weeks. Now they’ve reached a moment of truth: They’d better do something soon — in fact, they’d better announce a coordinated rescue plan this weekend — or the world economy may well experience its worst slump since the Great Depression.
...
What should be done? The United States and Europe should just say “Yes, prime minister.” The British plan isn’t perfect, but there’s widespread agreement among economists that it offers by far the best available template for a broader rescue effort.

And the time to act is now. You may think that things can’t get any worse — but they can, and if nothing is done in the next few days, they will.