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Treasury announced it was dipping into a Depression-era account to offer insurance similar to that provided for cash accounts in banks by the Federal Deposit Insurance Corp. The insurance fund is limited to $50 billion and meant to be available only for a year. In addition, funds that participate will have to pay a fee -- potentially undercutting the slim returns that such funds earn.

With roughly $3.5 trillion resting in such funds -- more than half the value of deposits held at U.S. banks -- a run against them could prove catastrophic. Market funds are major buyers of short-term debt, which is issued by financial companies and other corporations to finance day-to-day activities.

At a morning news conference, Treasury Secretary Henry M. Paulson Jr. described the move as one of a number of "powerful tactical steps to increase confidence in the system." In addition to Treasury's action, the Securities and Exchange Commission placed a two-week ban on short selling the stocks of 799 financial companies, and the Federal Reserve announced it would expand take further steps to increase the flow of money to banks and financial firms.

Paulson also announced that Fannie Mae and Freddie Mac, the mortgage giants seized by the government earlier this month, would buy more mortgages to support the housing and mortgage market.

"These two enterprises must carry out their mission to support the mortgage market," Paulson said.

The Federal Reserve, meanwhile, took actions of its own to try to keep the nation's money market mutual funds functioning smoothly. Using emergency authority it was granted in the Great Depression -- and already exercised this year in the rescues of Bear Stearns and American International Group -- the Fed will lend money against assets held by money market funds.

In effect, money market funds experiencing a cash crunch will be able to put up asset backed commercial paper they hold, and, through a bank, get cash for the Fed in exchange. Money market mutual funds hold about $230 billion in asset backed commercial paper, senior Fed staffers said. The investments are called that because they are backed by credit card receivables, auto loans, and the like, rather than the general credit of the company issuing them.

The Fed also said that it will buy up short-term debt of Fannie Mae and Freddie Mac. That is a move that, the senior Fed staffers said, will both help make it cheaper for Americans to get mortgage loans and help stabilize the situation for money market mutual funds

Paulson emphasized that even these dramatic moves were but a bridge while a broader financial rescue plan is crafted and enacted by Congress.

Paulson said he hoped the design of that larger effort, using hundreds of billions of dollars of federal money to clear bad home loans from the books of banks and other financial institutions, would be completed over the weekend and sent to Congress next week.

He was clear about the stakes: The seizure of world credit markets and the erosion of confidence in the health of seemingly strong financial firms had put the underlying economy at risk.