Bold government rescue steps buoy markets

U.S. markets are poised to open sharply higher this morning after top government officials from the administration and Congress announced a several actions last night intended fight the mounting financial crisis, according to published reports. Among the sweeping changes likely is the creation of a new government entity that could take bad assets off of banks' and financial firms' balance sheets and sell them at auction. Thestructure of this entity, modeled after the Resolution Trust Corp., which assumed the mortgages of troubled thrift institutions in the 1980s and 1990s, is being developed by Secretary of the Treasury Henry Paulson and Federal Reserve chairman Ben Bernanke, who are expected to meet with top congressional leaders today and over the weekend. Also overnight, the Securities and Exchange Commission issued an emergency order temporarily banning short selling in the shares of 799 financial institutions. The Financial Services Authority, the regulator of Britain's markets, announced a similar ban on yesterday. The U.S. ban takes effect today and runs until midnight on Oct. 2. In another dramatic step, the Treasury Department said it will insure any publicly offered money market fund, both retail and institutional, that pays a fee. President Bush has authorized up to $50 billion in protection, and the Treasury said it's acting using the authority of the Exchange Stabilization Fund. So mundane a vehicle that they rarely attract attention, money market funds have been thrust into the spotlight in the past week as the New York-based Reserve Fund announced Tuesday that its chief money market fund "broke the buck" and dropped to a value of 97 cents per share due to its holdings of paper from New York-based Lehman Brothers Holdings Inc. On Thursday, Boston-based Putnam Investments said it would shut its institutional Putnam Prime Money Market Fund. While not affecting individual investors directly, the move brought into further relief the the crisis of confidence in money market funds, which serve as a bank deposit alternative for millions of Americans.