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The $1 trillion telecommunications industry has long been one of the most resilient parts of the economy. But as the financial crisis has intensified, it has recently become clear that telecom can't escape the fallout of the credit crunch.

Although most analysts believe the damage won't be nearly as bad as the last telecom bust—when hundreds of firms went bankrupt, including giant Worldcom—there is growing evidence that the financial crisis is going to depress the debt-heavy telecom industry. To start with, rising capital costs are likely to take a bite out of earnings. In addition, the softening economy will probably crimp demand for such telecom services as land lines, cell phones, and Internet connections. Over the last week several Wall Street analysts trimmed their 2009 earnings estimates for AT&T (T), Verizon Communications (VZ), Sprint Nextel (S), and other operators. "Everyone is going to pay more for credit," says Craig Moffett, a senior analyst with Sanford Bernstein who has been bearish on telecom stocks.

A telecom slowdown could ripple through the technology sector. If the operators' cash flow declines as expected, that's likely to cause them to cut back on their capital spending plans. This would hurt the primary equipment makers that supply gear to the industry, as well as those that sell to them. It would also slow down the build out of future wireless and terrestrial networks.

Idled consumers might use more services

Steve Rago, an analyst at iSuppli, expects capital expenditures on worldwide wire line networks for the second half of 2008 to decline 20% from levels that telecom carriers expected earlier this year. Analysts also predict that the growth rate of spending on wireless networks will decelerate through 2010. Such cutbacks would hit equipment makers such as Alcatel-Lucent (ALU), Nortel Networks (NT), Cisco Systems (CSCO), Juniper Networks (JNPR), and scores of smaller players. "There is going to be significant sales weakness over the next couple of quarters," says Ari Bensinger, an analyst with Standard& Poor's. "A lot of these aggressive deployments are getting pushed out."

The impact, of course, would be softened if credit markets settle down. In fact, some big telecom operators such as Verizon say they have yet to see signs of a slowdown. Rather, Verizon execs believe that a recession could lead Americans to become even greater couch potatoes, saving money by gabbing on the phone, watching TV, and surfing the Internet. "I don't see any evidence of us slowing down," says Verizon spokesman Eric Rabe. "If you need to find a job, a broadband connection is pretty critical."

But if credit remains tight, telecom carriers will surely feel some pain. After all, telecommunications is one of the most capital intensive businesses in the technology industry. It costs billions of dollars to build and buy the networks that enable people to communicate. Earlier this year, Verizon dropped $9.4 billion alone for wireless spectrum that will enable it to build an even faster mobile network.

A Squeeze in Commercial paper

To help pay for these investments, telecom carriers use various forms of debt, such as commercial paper, credit facilities, and corporate bonds. These work well in good times. But with the financial system in a state of panic, credit has become much more expensive—and impossible for some companies to get.

U.S. stocks were trading higher Monday, jumping back to earlier highs after Fed chief Ben Bernanke's testimony on signs of loosening in the credit crisis. Investors responded positively to some positive earnings reports and to a narrowing in credit market spreads, which suggests that the government's efforts to stabilize the banking system are starting to work.

European stocks were higher as banks lined up to tap state rescue packages to shore up their finances, part of measures to stem a global financial crisis.

Bonds were slightly lower, with yields moving a bit higher. The dollar index was lower. Gold futures were sharply higher. Oil futures were up on speculation OPEC will cut output at emergency meeting.

On Monday, the Dow Jones industrial average was trading 199.60 points, or 2.25%, to 9,051.82. The S&P 500 index was up 24.36 points, or 2.59%, at 964.91. The tech-heavy Nasdaq composite index rose 21.03 points, or 1.23%, to 1,732.32.

On the New York Stock Exchange, 22 stocks were trading higher for every seven that were in negative territory, while on the Nasdaq the ratio was 17-8 positive, amid moderate trading, according to S&P MarketScope.

Major European indexes were trading higher Monday. In London, the FTSE 100 index surged 5.41% to 4,282.67. In Paris, the CAC 40 bounced 3.56% to 3,448.51, while Germany's DAX index rose 1.12% to 4,835.01.

In Asia, Japan's Nikkei 225 jumped 3.59% to end at 9,005.59, while Hong Kong's Hang Seng index surged 5.28% to close at 15,323.01.

President Bush, looking for answers to an economic emergency with just three months left in office will host an international summit to discuss ways to fix the world financial system but warned against reforms that threaten capitalism. "We will work to strengthen and modernize our nations' financial systems so we can help ensure that this crisis doesn't happen again," Bush said at the Camp David presidential retreat, according to an Associated Press dispatch. Bush, meeting with French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso, did not announce a date or site for the summit. But Sarkozy suggested it be held in the shadow of Wall Street before the end of November.

Governments continued to announce measures to shore up financial institutions. Germany's cabinet approved strict conditions for banks that make use of its €500 billion rescue package, including limits on managers' salaries, bonuses and severance. "The criteria for appropriate (remuneration) are based on responsibilities and personal performance, business conditions and the success and outlook of the company compared to others in its field," the provisions agreed by cabinet stated, according to a Reuters dispatch.

Bavaria's public sector bank, BayernLB, was ready to ask for funds, Bavaria's finance minister said. Commerzbank said it would take a close look at using the funds. Societe Generale led a steep fall by France's top three banks as concern heightened they may be next in line for state funds. On Sunday, the Dutch government agreed a €10 billion cash injection into financial group ING (ING), powering its shares higher by almost 23%. ING said it had agreed to sell its Taiwan Life insurance unit to Fubon Financial for $600 million, increasing its capital in a deal analysts said would benefit shareholders. In Sweden, the government outlined a plan worth more than 1.5 trillion crowns ($271.5 billion) that would include credit guarantees and a bail-out fund. "The government is proposing powerful measures to ease the effects on Swedish households and companies of the financial turbulence," said Financial Markets Minister Mats Odell.

Traders listened to Bernanke's testimony on the U.S. economic recovery to the House Budget Committee. Saying that uncertainties around the economic picture are unusually large, the Fed chief said it would be appropriate for Congress to pass a second fiscal package to stimulate growth. While recovery from what he expects to be a protracted economic slowdown will depend on how quickly confidence returns to the financial system, he said he was confident that the measures the government is taking would help restore people's trust in the financial system.

Also on the Fedspeak calendar Monday: Atlanta Fed President Dennis Lockhart on the U.S. economic outlook and Fed Gov. Randall Kroszner on risk management.

Offering more detail about the Treasury's plan to inject $250 billion into banks, Secretary Henry Paulson said the the new capital should be deployed, not hoarded, though the government hasn't defined the type of lending to avoid forcing bad lending decisions. Paulson also said he expects lenders to step up efforts to aid homeowners in avoiding foreclosures. So far interest has been pretty broad in the program and he emphasized that these are investments, not expenditures, which should ultimately not come at a cost to taxpayers.

In economic news Monday, U.S. leading indicators rebounded by a better than expected 0.3% in September, from a revised 0.9% decline in August (-0.5% previously). That left the 6-month annualized rate of change at -2.5% from -2.1% previously. Positive contributions from money supply, consumer expectations, and the yield curve more than offset negative contributions from building permits, initial jobless claims, stocks, and the factory workweek, notes Action Economics

Earlier this year, Steve Ribbing, who runs a family-style restaurant south of Buffalo, got fed up with the growing dent in his company's bottom line. The culprit? Egg prices, which have jumped nearly 50% over the past two years. Ribbing griped to his attorney, an act that ultimately led to a lawsuit against more than a dozen egg producers and the industry's trade group.

Critics say the price jump since 2006 was not particularly mysterious: egg producers, the plaintiffs contend, conspired to restrict supply as part of a broad scheme to boost prices. Ribbing's complaint moved from his lawyer to a large national firm, finally becoming a sweeping lawsuit that recently gained class-action status on behalf of restaurants, grocers, and other direct buyers nationwide. The litigation's targets include 13 of the nation's biggest egg producers, including Cal-Maine Foods (CALM), Pilgrim's Pride (PPC) and Rose Acre Farms, as well as a Georgia-based industry association, the United Egg Producers (UEP).

Justice Dept. Is Investigating

The average retail price of a dozen eggs, which had been stable for the better part of a decade, soared to $2.20 per dozen in March, after climbing from $1.63 in 2007 and $1.30 in 2006, according to the Bureau of Labor Statistics. Egg producers blame the increase on surging feed and fuel costs, although prices have retreated 15% since March, to $1.85 per dozen. The restaurant lawsuit filed three weeks ago in U.S. District Court in Philadelphia is one of six separate suits facing the egg industry. Some name a handful of companies while others, like the T.K. Ribbing's restaurant suit, target 16 major producers and interest groups. The suits generally allege similar schemes to raise prices, but the detailed Ribbing suit delves deepest and covers the broadest part of the industry.

The swift rise in egg prices has also caught the attention of the Justice Dept., which is "investigating the possibility of price fixing in the egg products industry," says DOJ spokeswoman Gina Talamona, declining further comment. All of the major egg producers either refused comment or didn't respond to BusinessWeek's requests for comment.

The producers all belong to the United Egg Producers cooperative, which in 2000 enacted an Animal Care Certified Program to improve hens' conditions by giving them more space in cages. Plaintiffs say the program was designed solely to lift egg prices by curtailing egg supplies. The total U.S. supply, which grew steadily from 7.1 billion dozen eggs in 2000 to a peak of 7.6 billion dozen in 2006, is down to 7.5 billion dozen this year, according to the U.S. Agriculture Dept. "The only portion of the program which they enforce are the ones restricting the total number of hens and production," says Jonathan Lovvorn, vice-president and chief counsel of the Humane Society of the U.S. "You violate that, they kick you out immediately." He says the co-op ignores "all kinds of other things you can do to animals—not providing proper veterinary care, letting animals die without proper food or water. Those are things we've seen."

UEP spokesman Mitch Head calls allegations that the welfare program was aimed at trimming hen numbers "ludicrous." "There's no provision for any farmer to not build more houses, add more conventional cages, add cage-free or free-range [hens]; they could've added as many as they wanted to," Head says. The program results in fewer hen diseases and lower mortality, and improves food safety, he said. "This is not what was better for the farmer. It was better for the hens and for our consumers."

Parents and children may rush through their days in different directions, but the American family is as tight-knit as in the last generation -- or more so -- because of the widespread use of cellphones and the Internet, according to a new poll.

In what was described as the first detailed survey of its kind, released today, researchers reported that family life has not been weakened, as many had worried it would, by new technology. Rather, families have compensated for the stress and hurry of modern life with cellphone calls, emails, text messages and other new forms of communication.

"There had been some fears that the internet had been taking people away from each other," said Barry Wellman, a sociology professor at the University of Toronto and one of the authors of the report, published by the Pew Internet & American Life Project. "We found just the opposite."

In the poll, 60 percent of adults said that the new technologies did not affect the closeness of their family today. Another 25 percent said cell phones and online communication made their families closer, while 11 percent noted that the technology had a negative effect.

Wellman said families appreciated the innovations because "they know what each other is doing during the day." This, he said, comports with his other research, which shows that technology "doesn't cut back on their physical presence with each other. It has not cut down on their face time."

The findings were based on a nationally representative poll of 2,252 people, which explored technology use and profiled in greater detail a group of 482 adults who were married or living together with minor children. These "traditional nuclear families" have been of particular scholarly interest, the report's authors said. They tried to examine trends in single-parent families, too, but the poll numbers were too small to be valid, they said.

Cellphones and internet use were widespread in two-parent houeholds, regardless of education, income, employment, race or ethnicity, with 94 percent saying at least one adult was online and 84 percent saying children were using the Internet.

This marks a large change in short order. Only since the turn of the century has a majority of Americans been users of the Internet and cell phones, researchers said.

When technology has changed family life, those polled said it was for the good.

Forty-seven percent of adults cited said cellphones and the internet had improved the quality of their family communication. Another 47 percent said there was no effect, and 2 percent said there there had been a decrease in quality.

The positive effect reflects family life for Randy and Ana Tillim of Germantown, who have two children. Their sons play online. Both parents rely on Blackberrys not just for work, but for the stuff of daily life. They let each other know about schedule changes, dinner plans, sick children.

"I think it brings us closer because we're able to communicate throughout the day," says Randy, 38. "I don't know what we did without it."

TOKYO, Oct. 19 -- To shore up a tumbling stock market and a troubled currency, South Korea announced Sunday it would guarantee $100 billion of foreign debt and supply $30 billion to banks and exporters in urgent need of dollars.

Amid a global financial crisis, South Korea has emerged as perhaps the most vulnerable major economy in Asia, despite plenty of foreign reserves in its central bank and booming exports to China, India and the Middle East.

The credit ratings agency Standard & Poor's placed five major South Korean banks on a watch list last week, citing their problems in finding dollars to pay back foreign currency loans. President Lee Myung-bak has pleaded with citizens to stop hoarding dollars and "refrain from greedily pursuing private interests."

Still, finance and central bank officials in Seoul had resisted the kind of sweeping guarantees to banks and financial institutions that have been offered in the United States, Europe and elsewhere in Asia. They had repeatedly said that the fundamentals of their country's economy were strong -- and blamed the foreign press for exaggerating financial problems.

On Sunday, though, the government conceded that fear has trumped fundamentals. South Korea's currency, the won, is down 30 percent against the dollar this year, making it the biggest loser among major world currencies. The stock market has fallen 38 percent. Panicky foreign investors have pulled more than half their holdings out of South Korean stocks.

"As other major economies start providing guarantees to inter-bank loans, the Korean government will take similar measures to avoid placing domestic banks at a comparative disadvantage in terms of overseas funding and to allay fears in the financial markets," a government statement said.

The central bank will guarantee, up to $100 billion, foreign-currency loans made by domestic banks between Monday and the end of next June, the government said. It estimated that these banks already owe about $80 billion on loans that come due before the end of next June.

The Bank of Korea has about $240 billion in foreign exchange reserves and will make $30 billion of it available to local banks that have been increasingly desperate in recent months to find dollars to pay back foreign currency-denominated loans, the government announced.

The loan guarantees require approval from the country's parliament. Until that comes, the government said that the Korea Development Bank or Korea Eximbank will cover the new commitments.

To prop up the struggling stock market and investment firms, the government said it "will provide tax incentives for long-term holdings of funds." And to help small- and medium-sized business, many of which have failed to find credit in recent months, the government said it would make an investment that should release about $10 billion in loans.

Unlike many other countries, however, South Korea decided not to increase the amount of bank deposits that are guaranteed by the government.

Korea's problems with finding dollars grew steadily more alarming this year, even as its exports boomed. Exports are up 28 percent in the first nine months of 2008, according to the Ministry of Finance.

Wireless semiconductor company Qualcomm Inc. will get an upfront payment of $2.5 billion from Nokia Corp. in a settlement of a royalties dispute, a spokeswoman said Friday.

The spokeswoman, Bertha Agia, declined to elaborate on the agreement, which was struck in July and calls for Nokia to make an upfront payment and ongoing royalties.

Nokia, the world's largest handset maker, said Thursday that the upfront payment was $2.28 billion.

Messages left with both companies seeking an explanation of the discrepancy were not immediately returned Friday night.

The 15-year licensing deal gives Nokia rights to a wide portfolio of San Diego-based Qualcomm's patents. The two sides agreed to drop all legal complaints against each other in the U.S., Europe and Asia.

Maoming, Wuhu and Loudi.

They're Chinese cities so far in the boonies that Lonely Planet doesn't even bother to mention them in its popular travel guide. But Wal-Mart has found them, as the company makes an aggressive push into China's smaller markets.

China's economic growth is rapidly spreading out from the main cities like Beijing and Shanghai into the hinterlands, where the middle class is taking off. In a report last year, the consulting firm A.T. Kearney said 75 percent of the middle market is expected to be in tier-two and tier-three cities by 2017.

These cities are "small" only by the standards of a country with 1.3 billion people. For example, Wuhu in eastern China has 2.3 million people and Maoming in the south has 6.8 million, providing a strong consumer base as incomes rise.

In response, retailers are pushing into the hinterlands, including American coffee chain Starbucks Corp. and French store Carrefour SA. Carrefour, the world's second-largest retailer after Wal-Mart, is the largest foreign retailer in China.

Faced with saturated markets at home, these retailers are increasingly looking to emerging economies such as China to drive sales growth. Wal-Mart's attempt to gain a bigger foothold in China is anchored in smaller cities: Only three of the 30 outlets Wal-Mart Stores Inc. opened in China last year were in Shanghai, Beijing and Shenzhen. The rest were in provincial capitals or other cities.

"I think the capacity for growth in China might exceed that of the U.S., if you look at it in the long term," Terrence Cullen, Wal-Mart's vice president of development in China, said in an interview in his office in Shenzhen, the southern boomtown across the border from Hong Kong.

Wal-Mart said its China sales rose 32.2 percent in the second quarter, while international sales overall were up 16.9 percent.

But experts warn there are risks in smaller markets. People are not as well-off, so it's harder to turn a profit. Local suppliers may be less reliable, a concern in a country plagued by quality scandals, including the recent discovery of contaminated baby formula blamed for killing four infants and making thousands sick.

Moreover, the big-bang growth strategy -- opening stores across China -- requires a bigger investment than the gradual expansion the company pursued in the U.S.

Two of the newest stores are in Loudi (pronounced lou-DEE), a steel and mining town of 4 million people in central China. It's just down the road from Shaoshan, the birthplace of late leader Mao Zedong -- who would likely be horrified to hear that a flagship of American capitalism has moved into his neighborhood.

At one of the new Loudi Wal-Marts, a woman in blue overalls greets shoppers. The sprawling, brightly lit and spotlessly clean store has the same general look and feel of one of the company's well-stocked, wide-aisled stores in the U.S.

But a few steps inside, it becomes clear that Wal-Mart is trying to deliver everyday low prices with Chinese characteristics.

The smoky scent of thick slabs of dried smoked pork piled high in a display case mixes with that of laundry detergent and plastic. There are foreign brands: Raid roach killer, Head & Shoulders shampoo, Budweiser beer and "pesto Italiano" flavored Pringles potato chips. But there are also bins of reddish-brown dried squid and vacuum-packed packages of preserved Wuchang fish, one of Mao's favorites.

"I come here all the time," said Chen Yatian, a 21-year-old engineering student. "The prices aren't higher than the small shops outside, and I think the quality is better. My friends and I buy all our snacks here, things like spicy dried tofu."

The need to satisfy sharply different regional tastes is one of the challenges Wal-Mart faces in smaller markets, said Dean Xu, professor of strategy and international business at the University of Hong Kong. Wal-Mart will have to source many goods from local suppliers, potentially raising quality issues. "If there is one incident, it can ruin your company's reputation," Xu said.

Still, Wal-Mart's Cullen says the expansion is a logical step as China's middle class swells and the economy becomes driven more by consumers than exports. Major markets have their drawbacks too, he added.

"The big cities are very difficult to do business in for all the obvious reasons: They're crowded. It's difficult to find real estate. It's expensive and there's competition," said Cullen, who previously helped rival Costco Wholesale Corp. break into South Korea and Taiwan.

In the United States, Wal-Mart started with a single store in Arkansas in 1962 and built up its distribution network slowly, opening stores in adjacent counties and avoiding big leaps, said Emek Basker, a University of Missouri economics professor who has done extensive research on Wal-Mart's growth. The company had a conscious policy to open outlets only within a day's drive of its distribution centers, she said.

Wal-Mart declined to comment on whether it would be scaling back its international expansion plans amid the global financial crisis.

Wal-Mart is being outmaneuvered by Carrefour because its executives have taken too long to understand the China market and add stores, said Burt P. Flickinger III, managing director of retail consulting firm Strategic Resource Group. Carrefour, with $4.3 billion in sales, ranked sixth among all retailers in China in 2007, according to the China Chain Store & Franchise Association. Its sales were up 24 percent over the previous year.

Wal-Mart was 13th, with sales of $3.1 billion, a 42 percent increase over the previous year. The American chain also owns a 35 percent stake in Trust-Mart, which operates about 100 stores in 34 Chinese cities.

At the Wal-Mart Supercenter in Loudi, homemaker Zhang Xiaoling, 32, said the store with the lowest prices would get her business.

"I always come here. I think the selection is great and the prices are fair," Zhang said, as she struggled to keep her 2-year-old son from wandering away. "There was a small supermarket just down the road. When Wal-Mart opened, it closed. It just couldn't compete."

A few blocks away, in the dark and dingy basement of a dilapidated building, most of the merchants at a traditional food market appeared blase about the new competitor.

Shau Youming, who sells spices and soy sauce in a small stall, said Wal-Mart hasn't hurt his business.

"I've got my old customers and they all live nearby," he said. "It's convenient for them to come here. My prices aren't high and I keep an eye on Wal-Mart's prices. I'm not trying to make a lot of money. Just enough to make a living."

Latin American governments haven't yet turned to one traditional source of aid as they combat the global economic crisis: the widely vilified International Monetary Fund.

The IMF became the target of popular contempt across the region for conditioning billions of dollars in much-needed loans on a so-called Washington consensus of policy dictates, including privatization, deregulation and balanced budgets.

Many Latin American leaders blame those requirements for worsening economic hardships in the 1980s and 1990s rather than easing them, and pan what they consider the IMF's continued heavy-handedness.

"The fund is not giving the world what it needs," Argentine Economy Minister Carlos Fernandez said on behalf of six South American countries at an annual IMF meeting this month. "Its financial assistance fails to provide the services members seek, as it continues to send immediate negative signals (and) comes with too many conditionalities."

Raw memories of their experiences with the fund's tight lending terms make it unlikely that Latin Americans will run for IMF help again.

"There's definitely a feeling that the solution that was imposed on them often exacerbated the economic illness rather than helped with the cure," said Shannon O'Neil, a Latin America expert at the Council on Foreign Relations in New York. "There's a real hesitation to borrow from the IMF, because there were so many strings attached."

These days, Brazil, Mexico, Argentina, Venezuela, Uruguay and others have paid off their debts to the fund, winning greater independence in policy-making.

Even as global turmoil spreads, Latin American economies are now healthier than before. And should they need help, they have a greater variety of multinational lenders to choose from.

The Washington-based Inter-American Development Bank, the Bogota-based Latin American Reserves Fund and the Caracas-based Andean Development Corp. pledged US$9.3 billion in emergency loans last week to ease regional cash-supply problems.

"We're putting everything we've got on the grill," IDB President Luis Alberto Moreno said.

The governments of Brazil, Venezuela, Argentina, Uruguay, Paraguay and Bolivia have meanwhile formed a new Bank of the South to finance development themselves.

Elsewhere, countries such as Iceland, Hungary and Ukraine have suggested they might seek IMF financing to ease the current crisis. But the IMF says it has received no formal request for help from any Latin American nation, though it's ready to assist as soon as it does.

Created in 1944 to rebuild the world financial system after World War II, the IMF initially helped developed nations lend to one another. By the 1990s, it had evolved into a rescue fund for troubled emerging economies -- but gave them little say on the terms of their loans.

"In the mind of countries that were taking money, it became an almost imperialist group, because the IMF lent with a lot of one-size-fits-all conditions," O'Neil said.

In Argentina, those tight fiscal requirements ignored the need for anti-poverty measures and prevented the government from spending its way out of a recession, contributing to the country's 2001 economic meltdown, O'Neil said.

An IMF spokesman declined to be quoted for this article.

The current crisis is challenging the old balance of power: As the U.S. and European economies shudder, other regions of the world have growth rates and fiscal accounts that appear comparatively strong.

The Washington consensus wasn't all bad for Latin America. Many countries continued balancing budgets in recent years as commodity export income soared, helping them build foreign currency reserves and lower debt burdens. Those resources are now helping them combat the global downturn.

Still, some Latin American leaders claim the crisis has exposed a double standard at the IMF, whose rich-country backers have managed their economies in ways that poorer borrowing nations were never allowed.

"When Brazil had problems, every day the IMF was giving us tips, saying, 'Do this' or 'Do that,'" Brazilian President Luiz Inacio Lula da Silva said this month. "Where are the tips they're giving now on the American crisis? Where is the IMF? Why aren't they in Europe giving tips? It's because this is their crisis."

Brazil and other developing nations are calling for an IMF overhaul that puts less weight on what they consider failed U.S. and European policies. They want increased oversight of advanced economies and are demanding that emerging nations have a greater say in IMF decisions so that those most likely to borrow can help set lending terms.

Now that economic crisis is rattling wealthier parts of the world that haven't felt the pinch in years, O'Neil said, "I think we could soon see some of those rules changing."

If there was one thing policymakers could agree on during the recent economic turbulence, it was that interest rates on U.S. home mortgages ought to come down, and fast. But as the government stepped in recently to shore up the nation's banks, those rates went up.

Chalk up another case of unintended consequences.

Since the beginning of the crisis that has upended financial markets and stunned the world economy, the well-intentioned actions of governments and officials have often created new problems that require nearly equally urgent solutions.

The complexity and linkages in the world financial system are to blame.

"Every action the government takes has cascading effects on the market, and they're not always easy to predict," said Jim Vogel, an analyst at FTN Financial. "The government has to have time to catch up."

When authorities in Ireland and Greece guaranteed deposits, banks across the rest of Europe feared a stampede out of their own countries, forcing many governments to take the same precaution. The race to guarantee deposits spread as far as Hong Kong and Singapore, where banks are considered relatively stable.

When the U.S. Treasury announced it was guaranteeing money market accounts, it fanned fears of a run on bank accounts.

And by not protecting preferred stockholders when the government seized mortgage-finance firms Fannie Mae and Freddie Mac, it sunk investor confidence in preferred shares in other financial institutions, too, making it harder for them to raise money that way.

"It's like a chess game," said William Poole, who was president and chief executive of the Federal Reserve Bank of St. Louis from 1998 to this March. "You might be able to anticipate the next couple of moves. But after that, it gets very complicated, very quickly."

Virtually every emergency measure over the past few weeks has had secondary and sometimes unpredicted effects, according to economists, and this is one of the key dangers in the weeks ahead, as the government issues more short-term loans to corporations, buys toxic securities and invests in banks.

One of the first examples of unintended consequences came as Lehman Brothers filed for bankruptcy protection. The bank's fall spurred investors to pull out of money-market mutual funds, many of which were tied to Lehman debt. Fearing a run on money-market funds, the Treasury on Sept. 19 announced it would guarantee these funds.

That made money-market investors feel better. But in turn, it led community bankers to erupt in protest as they saw investors pulling out of their bank accounts to invest in money-market funds -- which always paid more and now were just as safe.