US Treasury Secretary Hank Paulson today warned that more American banks could fail and that financial markets remain "severely strained" amid continuing fears about the prospects for the world's economies.

Mr Paulson said the financial turmoil in international markets had "seriously impacted" the US economy and that even the $700 billion bank bail-out, enacted via an Emergency Economic Stabilisation Act, might not be enough to save all institutions. He said: "The Act doesn't exist to save every financial institution."

Mr Paulson added that economic momentum has slowed "substantially across the industrialised countries" because of the financial turmoil, and said that he would be discussing ways to tackle the continuing instability at a meeting in Washington of the G7 finance ministers.

His remarks follow a warning by the International Monetary Fund that the world is heading for a major economic downturn. It said that both Europe and the US were already either in or on the brink of recession as the world was hit by "the most dangerous shock since the Thirties".

In the US, news of Britain's £500 billion bank rescue package was greeted with enthusiasm with some commentators and observers suggesting that the American authorities should follow suit with a similar scheme.

Among the endorsements was one in the Wall Street Journal, which declared: "The measures announced by the UK represent intellectual progress and offer the most sensible plan to date."

New York Times columnist Paul Krugman said: "Readers ask what I think should be done about the financial crisis. The answer is, what Gordon Brown is doing in Britain."

• 

  Sex, lies and the Stasi

  On this day in 1989 the Berlin Wall was finally breached, ending the reign of East Germany’s feared security service. Here Anne McElvoy, who spent much of the Eighties in the city, recalls her encounters with the spooks

  ---

• 

  The geeky-girl solo artists descending on the music scene

  Kookiness is what sells music these days and these opinionated artists have it in spades, says Jasmine Gardner

  ---

Why Sam's in the clear over that M&S dress

At last the truth about the M&S spotted dress that Sam Cam wore to the Conservative Party Conference

All stories