PRESIDENT BUSH SAID

Acting in the aftermath of Lehman's collapse and government rescues of American International Group Inc. and mortgage lenders Fannie Mae and Freddie Mac, President George W. Bush and congressional leaders said yesterday that they reached agreement on a rescue package aimed at reviving moribund credit markets.

The U.S.'s woes have been transmitted abroad as investors focus on how much capital banks have on hand and as financial companies hoard cash for their own needs, shutting off funding for those whose access to money is limited.

Fortis dropped 35 percent last week in Brussels trading on concern the company would struggle to replenish capital depleted by the 24.2 billion-euro takeover of ABN Amro Holding NV units and credit writedowns.

``Markets thought that they were over-leveraged,'' Dutch central bank governor Nout Wellink said. ``What's happening in the U.S. is having an impact on the rest of the world.''

The bailouts add to concern that Europe's patchwork of banking regulations will hinder coordinated response. While European Union officials are drafting legislation aimed at strengthening how large banks are monitored and what capital they must hold, governments have agreed only to knit supervisors closer together and pledged to cooperate in managing a crisis.

Rejecting Paulson Plan

Unwilling to commit taxpayer money up front, they have resisted calls to devise a plan for splitting the bill should a bailout become necessary. German Finance Minister Peer Steinbrueck and France's Christine Lagardelast week rejected a plea from U.S. Treasury Secretary Henry Paulson to follow the U.S. in erecting similar bailout mechanisms, arguing their banking systems aren't at risk of a systemic breakdown.

Still, of the $554.3 billion losses and writedowns recorded by banks since the start of 2007, 42 percent are accounted for by European institutions.

Daniel Gros, director of the Brussels-based Center for European Policy Studies, said in a report this month that the largest European banks have a leverage ratio -- which measures shareholders' equity to total assets -- of 35 compared with less than 20 for the biggest U.S. counterparts.

``Europe is under greater pressure to act now as it's still not ready for a major banking crisis and the worst fears of policy makers are coming true,'' said Nicolas Veron, an economist at Bruegel, a Brussels-based research organization.