KEY POINTS:
The United States Government hopes to have a plan ready this week to buy US$700 billion ($1 trillion) in "toxic" loans clogging the financial system and threatening the global economy.
It will be the largest bailout since the Great Depression.
The rescue plan would give Washington authority to spend the equivalent of seven times New Zealand's gross domestic product (GDP) on buying bad mortgage-related assets from US financial institutions.
The move comes after a week in which financial markets faced their most serious confluence of crises since the 1930s depression and threatened national economies and the worldwide banking system.
"It's like having a heart attack, and you go and get your chest cracked open and get it fixed, but the next morning you're still hurting," said Warren Simpson, managing director of Stephens Capital Management in Little Rock, Arkansas.
"This has been a beast of biblical proportions. Nobody has seen anything like it."
Investors and politicians will be watching the markets anxiously today amid fears that the euphoria that greeted early signs of the plan on Friday will give way to another slump in share prices.
The Dow Jones industrial average shot up 3.35 per cent and European shares made their biggest one-day percentage gain on record after the plan was revealed.
In New Zealand, the NZSX-50 index closed up 28 points, or 0.893 per cent, on Friday after a 3.4 per cent fall the day before.
The Reserve Bank put out a reassuring statement and made some changes to facilities available to banks to improve liquidity.
The New Zealand sharemarket will give the world its first indication today of whether the euphoria will be sustained.
Events overseas have caused share volatility, and market commentator Arthur Lim said that although the US action had created a floor, there would still be fluctuations.
"The ground has certainly been relaid for confidence to be rebuilt," he said.
"With such a heavy representation of overseas investors in the New Zealand market, it's inevitable when they get the jitters they tend to repatriate their money.
"So if they start feeling a bit better about life, our market will take the benefit from it."
US Treasury Secretary Hank Paulson spent the weekend urging Congress to authorise his daring bail-out, while Democrats called for extra help for poor households.
Speaking at the White House yesterday, President George W. Bush said: "This is a big package because it was a big problem."
The question is now whether Congress can work with a lame-duck Administration to quickly get legislation approved less than two months before a presidential election.
- NZ HERALD STAFF, AGENCIES
