US calls for unity as markets dive

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New York, October 7:: the surging global expansion in the last three years, were sucked into the vortex. Trading was halted in markets as far afield as Brazil and Russia when stocks plunged.

Mexico's peso sank to its weakest level since the currency was allowed to float in the mid-1990s, and stocks plunged.

"We are in a state of panic. Markets are out of control," said Bertrand Delgado, an economist at IDEAglobal who covers Latin America.

The banking upheaval that began on Wall Street has effectively shut down interbank and other loan markets, pushing industrialized countries closer to recession. Conditions remained poor for interbank lending.

Even as Sweden, Austria and Denmark followed Germany's lead by offering blanket deposit guarantees to depositors, investors from Tokyo to London continued to slash risk and positioned themselves for a further tightening of credit.

Oil prices fell below $90 a barrel and have dropped nearly 40 per cent from their peak, pushed lower with other commodity prices by worries about a looming recession.

With the US presidential election less than a month away, the campaign remained overshadowed by the debate about how to confront the worst banking crisis since the Great Depression.

"WE DON'T WANT TO RUSH"

In Texas, US President George W. Bush said it would take time to restore confidence in the financial system and to free up credit, telling reporters it was important that the rescue program not waste taxpayer money.

"We don't want to rush into this situation and not have the program be effective," Bush said.

Campaigning in North Carolina, Democrat Barack Obama urged the Bush administration to act quickly. "We've seen that contagion is spreading to all parts of the globe," he told reporters.

On Capitol Hill, lawmakers pressed for an accounting of who was responsible for the financial train wreck.

The disgraced head of Lehman Brothers Holdings Inc told Congress that banking regulators knew exactly how the failed bank was pricing its distressed assets and about its liquidity in the months before its collapse.

Lehman chief executive Richard Fuld, grilled about the failure of his bank and his own pay, said he did not know why the US government chose to help other financial companies but not Lehman as it hurtled toward bankruptcy. "Until the day they put me in the ground, I will wonder," he said.