ROME, Feb 14 (Reuters) - The G7 industrial powers, fearing a 1930s-style resurgence of protectionism, ended crisis talks in Rome on Saturday with a pledge to do all they could to combat recession without distorting free trade.

Aware of their limits, they also adopted a more conciliatory tone towards China, a non-member regarded as vital to success at an April G20 summit in London where both rich and developing economies hope to produce visible progress on promises to make the global financial system safer and more accountable.

"We are confronted with a broader and deeper slowdown than has been experienced in decades," said U.S. Treasury Secretary Timothy Geithner.

"We will work closely with our colleagues in the G7 and the G20 to build consensus on reforms that match the scope fo the problem revealed by this crisis."

On the day in Rome, it was mostly renewed pledges from the gathered finance ministers and central bankers, amid mounting tension over the impact economic stimulus plans and state bailouts of industry could have on each other.

Geithner, making his G7 debut in the job, publicly rowed back on comments that Beijing was manipulating its exchange rate to its advantage in export markets and sought to soothe concerns over Washington's own anti-crisis plans.

Treasury Secretary Timothy Geithner said Tuesday the new administration will wage an aggressive two-front battle against the worst financial crisis in seven decades with commitments that could total up to $2 trillion.

But investors appeared wary of the government's latest plans. The Dow Jones industrial average plunged about 300 points in afternoon trading as financial stocks led the market lower, reflecting Wall Street's growing concerns about the government's ability to revive the banking industry.

The efforts were part of the government's major overhaul of the widely criticized financial rescue program.

The Federal Reserve said it would expand the size of a key lending program to as much as $1 trillion from $200 billion. The program, which has yet to begin operations, is designed to boost resources for consumer credit and small business loans.

The Fed said the program would be expanded to cover the troubled commercial real estate market and certain residential mortgages.

"Right now critical parts of our financial system are damaged," Geithner said. "Instead of catalyzing recovery, the financial system is working against recovery and that's the dangerous dynamic we need to change."

Geithner said the loss of 3 million jobs last year, and another 600,000 just last month underscored the urgency for government action.

The merger puts one of the credit crisis's good guys under pressure.

Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.

The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.

Rep. Barney Frank, chairman of the House Financial Services committee and a long-standing critic of executive largesse, said the bonuses tallied by the AP review amount to a bribe "to get them to do the jobs for which they are well paid in the first place.

"Most of us sign on to do jobs and we do them best we can," said Frank, a Massachusetts Democrat. "We're told that some of the most highly paid people in executive positions are different. They need extra money to be motivated!"

The AP compiled total compensation based on annual reports that the banks file with the Securities and Exchange Commission. The 116 banks have so far received $188 billion in taxpayer help. Among the findings:

When the Super Bowl festivities roll into Tampa late next month, the party blitz and corporate spending that surround the big day may take a hit because of the economic crisis.

Sponsors have been slower to commit. Companies are scaling back plans, carefully watching expenses, bringing fewer guests and pushing back travel bookings. The private party circuit will be missing a few staple destinations, including the annual Sports Illustrated fete.

"The decision making process is just a little slower," Reid Sigmon, executive director of the host committee, said of the efforts to attract sponsors. The committee has reached about 80 percent of its sponsorship goal - a level it has been stuck at since October.

"A lot of companies are kicking the tire, so to speak," he said.

Even so, the Feb. 1 game will sell out. And, to be sure, there will still be plenty of star-studded events: Maxim, ESPN The Magazine, and Penthouse all said they have parties in the works. The Lingerie Bowl, a televised alternative halftime event featuring semi-dressed models, will hold three games and a red-carpet affair. Beer giant Anheuser-Busch (nyse: BUD - news - people ) is sponsoring concerts and other events.

And there will be a bevy of official NFL activities, including the weeklong NFL Experience, which features interactive games and autograph sessions.

The host committee is hoping for 100,000 visitors, the same as in 2001 when Tampa last had the game, but NFL spokesman Brian McCarthy said the number may drop.

What Would Keynes Do?

The government should spend on stuff, not on bad assets.

Every day that goes by makes clearer the parallels between the current financial crisis and the one that led to the Great Depression. Then, as now, the core problem was one of deflation, or falling prices. But fixing it will require more than just low interest rates. This was the key insight of British economist John Maynard Keynes, whose theories finally explained how to end the Great Depression. They may be the key to solving today's crisis as well.

The Great Depression was so deep and prolonged for many reasons. Herbert Hoover stupidly signed the Smoot-Hawley Tariff, which crippled international trade and finance, and imposed one of the largest tax increases in American history in 1932, which was exactly the wrong medicine at the wrong time. Franklin D. Roosevelt at least understood that deflation was at the root of the problem, but he thought artificially raising the price of gold and preventing businesses from cutting prices and wages by law was the solution. In fact, it prevented the economy from adjusting, which made the situation worse.

What few people understood at the time was that the Federal Reserve was primarily responsible for the deflation and the only institution that could have done anything about it. As we now know, the Fed's tight monetary policy brought on a financial crisis that began with the stock market crash in 1929. Smoot-Hawley was also a factor, but it wouldn't have been capable of inducing such a crisis if Fed policy hadn't already put financial markets in a fragile condition.

In its initial stages, the Fed might have been able to prevent a full-blown depression by being a lender of last resort. It should have been aggressive about buying every financial asset it could lay its hands on and created as much money as necessary to do so. But it didn't. Instead, it was passive and, as the value of financial assets collapsed, banks closed and vast amounts of wealth simply vanished.

The money simply disappeared, because there was no federal deposit insurance in those days. According to research by economists Milton Friedman and Anna Schwartz, the nation's money supply fell by one-third between 1929 and 1933, which induced a 25% fall in price levels over that period.

As prices fell, businesses were forced to sell goods for less than they cost to produce. They couldn't cut costs easily because that meant reducing wages, which workers naturally resisted. Layoffs were the only way to cut costs, but this meant workers didn't have any income with which to buy goods, since there was no unemployment compensation either. This created a downward spiral that proved very difficult to stop.

The decline in wealth also reduced spending, and the fall in prices had the effect of magnifying debts. Debtors were forced to repay loans in dollars worth 25% more than those they borrowed in the first place. Farmers, who are perpetually in debt, were especially hard hit. In effect, if they took out loans that were worth X number of bushels of wheat and were forced to repay them with the same number bushels, they needed 25% more bushels to repay.

Iceland's prime minister said Saturday he has no intention of stepping down over his country's economic meltdown, even as thousands of angry citizens demanded his resignation during a noisy protest outside parliament.

Geir H. Haarde said he intended to lead Iceland through a crisis that has seen the spectacular collapse of the island's high-flying "Nordic tiger" economy - and which he predicted would worsen next year.

"I think it's inevitable that we will have a severe drop in GDP, in purchasing power, in employment," Haarde told The Associated Press during an interview at his office in central Reykjavik. He said 2009 "will be a very difficult year for us."

A crowd of 4,000 to 5,000 people gathered in the bitter cold outside the tiny stone building that houses Iceland's parliament, demanding elections for a new government. Many expressed a sense of shock and betrayal at their country's sudden fall from grace.

Just last year, this volcanic island on the edge of the Arctic Circle topped a United Nations "best place to live" poll. But last month Iceland's three major commercial banks collapsed under the weight of huge debts amassed during years of rapid economic growth. Since then the value of Iceland's currency, the krona, has plummeted, businesses have gone bankrupt and hundreds of people are losing their jobs each week in this nation of 320,000 people.

"Everything's gone to the dogs," said protester Hilmar Jonsson. To illustrate the point, he came to the demonstration accompanied by a Labrador, two Chihuahuas and a silky terrier, all decked out in sweaters of the red, white and blue Icelandic flag.

Anti-government protests that began eight weeks ago have grown larger and angrier, and draw a wide cross-section of Icelandic society. Saturday's crowd included everyone from anarchists in ski masks to young families and retirees.

Congress to Detroit: What's Your Plan?

If the Big Three automakers can't come up with a radical plan that will satisfy Congress, they can kiss the $25 billion bailout goodbye

The Ford Flex rolls off the assembly line at an assembly facility in Oakville, Canada. Simon Hayter/Getty Images

By David Welch

After going to Capitol Hill and begging for a $25 billion bailout, the three chief executives of General Motors (GM), Ford (F), and Chrysler have been sent away with a request for a "plan" by members of Congress. And if they want to get the taxpayers' money they so desperately need, they had better come up with something good.

The problem is, there's not a lot they can say that Congress, specifically Senate Republicans, wants to hear.

Many people, inside and outside the industry, believe the Big Three need to make wrenching cultural and strategic changes if they are to survive. One is former Treasury Secretary Paul H. O'Neill, who sat on the GM board from 1993 to 1995. "This is not going to work," O'Neill says, "unless there is 100% change [in Detroit]."

Which brings us to the question: How can government give Detroit a bridge loan while ensuring that the companies do more to be competitive? While the automakers offered nothing new in Washington, GM sources say President and Chief Operating Officer Frederick A. "Fritz" Henderson has talked almost daily with United Auto Workers President Ron Gettelfinger, discussing different things the two sides can do to cut costs. For its part, Ford says it can last into later next year, and Chrysler has been seeking a buyer.

UAW Calls for Concessions

In the meantime, government, labor, and the automakers need to come up with a plan that Congress will buy. Otherwise, bankruptcy is a possibility. If that happens, buyers would be turned away and revenue would plummet, Henderson said in an interview on Nov. 18.

But here's the tricky part. According to one Big Three lobbyist, Democratic congressional leaders don't want a plan that slashes jobs and cuts union benefits. Republicans think that's a great idea. With no clear direction from Washington yet, here's what a smart bailout package might look like. Let's start with the union. There's no question the UAW has made huge concessions over the past three years. The union cut more than 100,000 jobs and agreed to a new $14-an-hour wage for new workers (half the rate of veteran employees), as well as a health-care deal that will make GM much more competitive with Toyota (TM). Detroit will reap that savings mostly in 2010.

But there's a big problem. None of the companies can hire new workers because they have to retire the veterans first. Plus, sales are too low to justify new hiring so none of them have been able to realize the savings, says Henderson. For GM, he says the company can find its breakeven point even at sales rates as low as 11 million or 12 million vehicles a year, but it will take time and any new action must be negotiated.

To see these companies through to 2010—and send the message to Congress that management and the union are serious about helping to build the bridge—the UAW could agree to cut to Toyota-level pay and lower benefits at least until the loans are repaid. The good news is that UAW chief Gettelfinger indicated at a news conference on Nov. 20 that he'd be willing to do something. "The UAW is at the table," he said. "We welcome all stakeholders to make concessions."

White-Collar Perks Under Scrutiny

So the union is prepared to make cuts if Congress demands it. UAW workers in domestic plants make $29 an hour while Toyota workers make at most $25.

WASHINGTON (CNNMoney.com) -- World leaders convened Saturday for a second straight day hoping to tackle a financial crisis that has ricocheted across the globe and left the United States and other countries on the brink of deep recessions.

Their goal: to prevent a similar calamity from happening again.

The historic two-day summit meeting, which brought together prime ministers and presidents from Group of 20 countries, was in full swing Saturday following an extravagant working dinner at the White House.

"We had a good frank discussion last night," President Bush said. "There's some progress being made, but there's still a lot more work to be done."

The conference participants were aiming to figure out what caused the global crisis and assess government responses to it, Bush said Friday. The summit would also identify regulatory reforms and launch a "specific action plan" to implement them, he said.

"Billions of hardworking people are counting on us to strengthen our financial systems for the long term," he added.

Bush and fellow G-20 leaders are expected to issue a statement at about 3 p.m. ET on the findings of the summit.

Still, many experts anticipate that announcement to be light on specifics.

"I think it is going to be pretty vague," said Simon Johnson, a professor at the Sloan School of Management at the Massachusetts Institute of Technology and a former chief economist at the International Monetary Fund. "You could call it productive chaos."

In the days leading up to the summit, speculation abounded that leaders would accomplish little else but narrowing the focus for future talks - likely to be held in the first few months of 2009 after U.S. President-elect Barack Obama is sworn into office.

Obama is not attending this weekend's summit. He sent as emissaries former U.S. Secretary of State Madeleine Albright and Jim Leach, a former Republican congressman from Iowa.

Bush, who offered to host the meeting nearly a month ago, echoed those exact sentiments in remarks made earlier this week. The imminent change in power at the White House has led many to believe that could also hamper any progress.

Attendees of the summit include leaders from such nations as China, Brazil, Saudi Arabia and Japan.

The pace of the world's financial problems - rooted in large part in the collapse of the U.S. housing market and the risky lending and borrowing that went along with it - have accelerated in recent weeks.

The Organization for Economic Cooperation and Development, an international group based in Paris, said this week that the gross domestic product for its 30 members was likely to fall by 0.3% in 2009.

Major indexes around the globe have fallen off a cliff over the last two months. The Russian stock market has lost 65.5% of its value since the start of the year. Stocks in Japan and the United States have been equally hard hit, falling 42% and 33%, respectively.

In Europe, the pain has been particularly acute. The European Union on Friday officially declared that the 15-nation group had entered into a recession, with its gross domestic product declining 0.2% for the second straight quarter.

And other countries have nearly collapsed under the weight the economic crisis.

In Iceland, where the government intervened to save the banking system from total failure, inflation is running at a painful 12.1% while economic growth has nearly flatlined.

Hoping to halt the contagion, central bankers and government officials have taken unprecedented steps in recent weeks.

Britain, France and the United States have bought ownership stakes in banks and pumped them full of capital in the hopes of unlocking frozen credit markets. Earlier this week, China unveiled a massive, $585 billion economic stimulus package to try to keep its once red-hot economy moving forward.

With the crisis showing no signs of abating, several leaders have been trying to advance an agenda for the talks, which some observers have referred to as "Bretton Woods II" - a nod to a similar global economic summit held in July 1944 to reverse some of the painful trade and foreign exchange policies enacted in the wake of the Great Depression.

There have been calls, for example, to create a global accounting standard to replace the current mark-to-market standard, which some have blamed for the billions of dollars of losses suffered by banks.

Credit rating agencies and hedge funds have also become a target. French President Nicholas Sarkozy, who has embraced a hard-line approach toward regulation, has publicly said he is in favor of greater oversight of both industries.

And there has also been speculation that additional countries could enact economic stimulus packages of their own in the wake of the talks.

One underlying fear that President Bush attempted to address in recent days, including in an op-ed piece he wrote in Saturday's edition of The Wall Street Journal, is rising protectionism.

There is concern that some countries could levy harsh tariffs on imports to prop up their ailing economies, or that some governments could try to restrict capital flows, which spelled disaster for many emerging economies as the crisis gained momentum.

But what is expected to remain front and center is the subject of regulation and how to best modernize the global financial system for the 21st century.

One approach could involve granting greater powers to the Financial Stability Forum, which represents central bankers and regulators, or the International Monetary Fund, which has played a large role in recent weeks helping to bail out struggling countries.

Another possibility could involve the creation of a college of regulatory supervisors that would exchange notes about some of the trends and risks they are seeing within their own borders.

• View Slide Show

After nearly four years as a management consultant at such firms as Deloitte Consulting and Booz Allen Hamilton, Ari Perlman was itching to try his hand at investment banking. So this summer the 26-year-old MBA student at the University of Virginia's Darden School of Business signed on with Lehman Brothers for an internship. Then all hell broke loose. With the economy unraveling and much of Wall Street seemingly on the brink of collapse, Lehman slashed bonuses for interns. And by the time Perlman returned to campus, the company had filed for bankruptcy. Lehman's last check for Perlman's travel expenses? Bounced. An e-mail explained that a new check would be in the mail. Eventually. "I haven't heard anything from them since," says Perlman, who's now looking for a consulting job. "And frankly, I am not too hopeful."

On the nation's B-school campuses, hope used to spring eternal. No more. Students like Perlman are downsizing their expectations, rejiggering career plans, and settling for less as the cascading effects of the global financial crisis start to be felt at MBA programs around the country. With companies pulling back on second-year recruiting and competition for the few remaining finance jobs becoming fierce, students are entering what surely is the toughest MBA job market since the dot-com bust. "I think next fall is going to be very, very difficult," says George G. Daly, dean of Georgetown University's McDonough School of Business. "This is terra incognita."

Despite the gloomy outlook for current students, applications to B-schools are on the upswing, driven largely by applicants who have been laid off or are otherwise hoping to ride out the recession. With more applicants to choose from, admissions officers can be pickier, making 2009 a difficult year to land a slot at a top B-school. Meanwhile, professors and deans are attempting to make sense of the financial crisis in the classroom, offering new electives and town-hall-style meetings on the meltdown, altering syllabi, and writing new case studies based on recent market-churning events. Risk management, until recently an unpopular elective, is expected to become a more important part of many B-schools' curriculums in three to five years, a trend that Robert Meyer, co-director of the Risk Management & Decision Processes Center at the University of Pennsylvania's Wharton School, calls "potentially transformational."

For current students, though, the only concern is finding a job—and nowhere is that dream receding faster than on Wall Street. Brian Mirochnik, 26, an MBA student at the University of Rochester's Simon Graduate School of Business, is facing that reality head-on as he looks for jobs in the investment banking field. He didn't receive a job offer from UBS (UBS) after his summer internship and now is scrambling to find a position, a search he fears could easily stretch into the spring. "Banks are telling me they are going through their own layoffs and don't know when they are going to start hiring again," says Mirochnik, who has given up on the big Wall Street firms and is looking exclusively at boutique investment firms and mid-market banks. "A lot of the factors affecting my future employment are just out of my hands."

Second-year students such as Mirochnik without job offers appear to be in the most precarious position. According to a survey by the umbrella group MBA Career Services Council, about 70% of the 77 schools surveyed said they saw a downturn in full-time recruiting opportunities in financial services in October. Meanwhile, about half of the schools said overall full-time job postings and on-campus recruiting this fall was either flat or down 5% during the same period, with some indicating it has fallen as much as 10%.

In the coming year, the job market for MBAs may begin to bear a striking similarity to the period following the dot-com bust when some banks and consulting firms rescinded or renegotiated job offers they had extended to second-year students. That hasn't happened this time around—yet.