Go to Naked Capitalism or The Financial Times if you need to wallow in our disaster.

Here’s Bush touring the disaster area.

And the latest weather worry.

At today’s meeting of the G-7 Finance Ministers and Central Bank Governors, we finalized an aggressive action plan to address the turmoil in global financial markets and the stresses on our financial institutions. This action plan provides a coherent framework that will direct our individual and collective policy steps to provide liquidity to markets, strengthen financial institutions, protect savers, and enforce investor protections.

The G-7 is compelled to robust international partnership and cooperation. Never has it been more essential to find collective solutions to ensure stable and efficient financial markets and restore the health of the world economy.
Global financial market conditions are severely strained. In the United States, our economy has been facing a prolonged period of uncertainty and our financial markets are experiencing unprecedented and extraordinary challenges.

A root cause of this situation is the housing correction and a lack of confidence in mortgage assets, as well as a lack of confidence in many of the financial institutions that hold these assets. We are squarely focused on the immediate need to stabilize our financial markets, and recognize that investor confidence is critical to restore liquidity and enhance the stability of our financial system.

As recent developments have demonstrated, the market turmoil is a global event. Governments around the world have taken actions to address financial market developments, and international cooperation and coordination has been robust. It is critical for governments to continue to take individual and collective actions to provide much-needed liquidity, strengthen financial institutions, enhance market stability, and develop a comprehensive regulatory response. We must continue to closely coordinate our actions and work within a common framework so that the action of one country does not come at the expense of others or the stability of the system as a whole.

Central banks from around the world have acted together to provide additional liquidity for financial institutions, taking the necessary steps to support the global economy. The Federal Reserve has established swap lines with nine central banks to reduce pressures in global short-term U.S. dollar markets. Additionally, the U.S. Treasury implemented a temporary guaranty program for the U.S. money market mutual fund industry.

Here in the United States, the members of the President’s Working Group on Financial Markets (PWG) made it clear that we will coordinate the use of our existing and new authorities to restore market confidence. Other countries are considering appropriate programs given their national circumstances, and we pledge to stay in close contact as they move forward with their plans.

I briefed my colleagues on the work we are pursuing to implement swiftly and thoughtfully the new financial rescue package. We are developing strategies to use the authority to purchase and insure mortgage assets and to purchase equity in financial institutions, as deemed necessary to promote financial market stability. As we develop plans to purchase equity, as in the approach we are taking to broad mortgage asset purchases, we are working to develop a standardized program that is open to a broad array of financial institutions. Such a program would be designed to encourage the raising of new private capital to complement public capital. Consistent with the legislation, any equity the government purchases through a broadly available equity program would be on a non-voting basis, except with respect to the market standard terms to protect our rights as investors.

Securities regulators around the world have taken measures to enhance market stability by addressing market abuse. Here in the United States, we have taken steps to protect the savings of the American people by increasing deposit insurance limits, and the European Union member states have raised individual deposit limits to an EU-wide minimum.

The G-7 and others are working together through the Financial Stability Forum (FSF) to ensure a comprehensive, international regulatory response to the financial market turmoil. FSF Chairman Mario Draghi reported to us on the good progress that has been made in improving prudential supervision and regulation, increasing disclosure and transparency, and enhancing accounting frameworks. I am committed to making sure this work continues. We are also committed to tackling the next steps laid out by Chairman Draghi to be done by the end of this year and our ambitious agenda for 2009.

WASHINGTON (MarketWatch) – The Group of Seven finance ministers and central governors released on Friday the following plan of action to address financial disruptions.
Credit crisis: Global responses

G7 nations vow action
Finance ministers outline sweeping commitment to “urgent and exceptional” actions to stabilize financial markets.

The G-7 agrees today that the current situation calls for urgent and exceptional action. We commit to continue working together to stabilize financial markets and restore the flow of credit, to support global economic growth. We agree to:

1. Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.

2. Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.

3. Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.

4. Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.

5. Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.

The actions should be taken in ways that protect taxpayers and avoid potentially damaging effects on other countries. We will use macroeconomic policy tools as necessary and appropriate. We strongly support the IMF’s critical role in assisting countries affected by this turmoil. We will accelerate full implementation of the Financial Stability Forum recommendations and we are committed to the pressing need for reform of the financial system. We will strengthen further our cooperation and work with others to accomplish this plan.

End of Story

But that hardly tells the story.  The day’s low was 7,882!  And the high 8,901.   Over 1,000 point swing on the day.

The cause:  Talk by the g7 ministers, including paulson, about re-engineering the global finance system (by Monday morning if possible).  See texts below.

The Dow 30 index is now down 40% from its (deeply deluded) all time high last October.

A 20% drop is usually called a crash. So we’ve now had two.

This week’s drop in the Dow 30 — 18% — was the worst week in the index’s 122 year history.

Morgan Stanley is on the ropes.  Everyone now agrees Lehman was indeed too big to fail.  So everyone is expecting anything at all to be done to keep anybody else of that dimension out of bankruptcy and meeting obligations.

Bush came out today to talk to the TV.  Mumbled that the fundamentals of the economy were sound. Ten minutes later the Dow was down another 400 points.

One might think the lesson is that morons in high places are a bad idea. But then what must one think of the Palindrones?

Meanwhile in the Other Worlds, joy:

“We are very happy that America’s economy is in jeopardy and they are paying the price for their misdeeds. God is punishing them.”  The Ayatollah Jannati.

Low on the day 99.35.

Time to bounce perhaps … at least for a while.

And the Dow closes down 679 points, at 8,579.

Here’s Joltin’ Jumpin’ Jersey Jim Cramer re how the big short sellers destroy targeted stocks.

Murdoch (formerly Dow) 30 were down on the news 191 points.

Iceland, Iceland … Who’s next?

The first sovereign victim of the crisis, perhaps.

And as for the idiotic Tracy Barnes (prior comment):  The dollar has fallen from 106 Yen last week to … 101.36 or thereabouts at the moment.

For years 110 yen was the zen-laden barrier, which the Japanese government would defend (by buying dollars with yen) at every challenge (wishing their currency to remain relatively weak so they can sell electronics and cars to Joe Sixpack at low prices).

But the Japanese retreated from 110 across the past year’s debacle, and the zen-laden level of 100 Yen to the Dollar is now in the sights of the currency traders.  The low so far today is 101.07.

This afternoon on Fox Business Channel, f’rinstance (click the video screen mid post) — with the Dow down about 600 points, viewers were treated to vivacious Tracy Barnes:

QUOTE

I’m gonna give you some GOOD news! In the midst of all this, the market fall, and the credit markets tightening, foreign officials saying the U.S. is gonna lose its credit rating — the dollar is UP! More than it’s been — it is SURGING! The Euro is down — we’re at $1.35 against the Euro, this is a thirteen-month low! And ya know what it’s telling you?! It’s telling you that, people might think WE suck, but THEY suck MORE! So they’re coming to us, they’re buying our dollar — I think that’s good news, Liz.