A 250 billion US dollar plan to buy stakes in a variety of banks was announced by the US government on Tuesday.
President George W Bush said that the latest investment from the government would restore confidence in the banking sector and ultimately help to preserve free markets despite the move effectively creating part nationalisation of the banking sector.
The announcement made by the US comes only a day after the UK government revealed plans to inject up to 37 billion pounds sterling of taxpayers money into the Royal Bank of Scotland, Lloyds TSB and HBOS.
European governments that share the euro currency have also said they will by investing one trillion euros to protect banks through emergency measures and other guarantees, with the bulk of the money being used to guarantee lending between banks.
Share prices across the globe on Tuesday responded to the announcements with indexes reporting increases as confidence grew, the Nikkei index in Japan rose by 1,171 points, the biggest one day rise in its history.