Nine large banks, including Citigroup, JPMorgan Chase and Goldman Sachs, agreed to give the government stakes in exchange for new capital, as the US partly nationalises banks for the first time since the Great Depression.

"This is an essential short-term measure to ensure the viability of America's banking system," President George W. Bush said in announcing the move.

He said the US government's intervention was "not intended to take over the free market, but to preserve it."

Governments around the world have been scrambling to shore up banks and restore public confidence in the global financial system, which is facing its worst crisis in decades.

Major banks have failed while others have been taken over or nationalised, amid a freeze in the flow of credit sparked by a pile-up of bad mortgage-related debt in the United States.

"The financial tsunami we now face is a global crisis," said Donald Tsang, the chief executive of Hong Kong, one of the world's financial hubs.

"Its destructive force is much stronger and more widespread than the Asian financial turmoil in 1997," Tsang said. "The recovery will take longer, be more difficult and certainly cannot be taken lightly."

Governments have made available hundreds of billions of dollars to bail out financial institutions, leading critics to charge that the financial system keeps profits private but makes the public at large pay for losses.

Australian Prime Minister Kevin Rudd said there had been "obscene failures in corporate governance which rewarded greed without any regard to the integrity of the financial system."

"What we have seen is the comprehensive failure of extreme capitalism -- extreme capitalism which now turns to government to prevent systemic failure," Rudd said.

In addition to the cash infusion for banks, US officials said, the Federal Reserve would soon act as the "buyer of last resort" for commercial paper, the corporate debt critical for financial markets and companies.

The efforts are part of a 700-billion-dollar US bank bailout announced last month.

European nations announced their own 1.8 trillion euro (2.4 trillion dollar) package on Monday after a weekend pledge by the world's wealthiest nations to use all available tools to save key financial institutions.

The moves have come amid growing fears that the world is headed into a global recession as well.

Janet Yellen, the head of the San Francisco branch of the Federal Reserve, said the United States -- the world's largest economy -- appeared to be in a recession.

In the face of the crisis and fears of a serious global economic downturn, share markets have swung wildly as governments unveil new measures -- but world markets on the whole are sharply down since the beginning of the year.

In the US, the Dow Jones Industrial Average fell 0.82 percent Tuesday while the Nasdaq shed 3.54 percent.

In early trade in Asia on Wednesday, major markets were all in the red. Japan was off 1.44 percent, Hong Kong was down 1.7 percent and Australia dropped 0.9 percent.

Europe bucked the trend Tuesday, with London's FTSE 100 gaining 3.23 percent, the CAC 40 in France adding 2.75 percent and the Frankfurt Dax moving ahead 2.70 percent.

Stock markets have been in a state of panic since the middle of last month when Wall Street investment bank Lehman Brothers filed for bankruptcy after the US government refused to bail it out.

Leaders from the 27-nation European Union will meet Wednesday and Thursday in Brussels, looking to rally behind their plans to bolster the financial system.

"The stakes are higher than ever before and the coming days will be crucial for the international financial community," British Prime Minister Gordon Brown said.

"It will take time -- and these are tough times -- for us to resolve the problems that have emerged in the banking system. The resolve of our leaders will be put to the test in the coming days."

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