Wall Street is hoping that Washington will come to its rescue.

Stocks surged late in the trading day on Thursday after CNBC reported that Treasury Secretary Henry Paulson is planning to create a federal agency to bail out troubled financial institutions.

The agency would likely be something akin to the Resolution Trust Corporation that liquidated hundreds of savings and loans after that banking fallout. In this case, such an agency would take the bad debt off of the balance sheets of troubled financial institutions so that they can return to a more normal course of business.

Details of the plan, including the cost to taxpayers, were not known.

The news is certainly great for the markets, but does New York know that Washington is about to close down? Congress is hoping to adjourn this session next Friday to campaign on their home turf until election day. The lawmakers may not come back for votes until after the end of the year, when a new Congress and administration will be in place.  

Of course, extenuating circumstances such as this major financial crisis could keep legislators at work in D.C. until early November if need be. Paulson is said to be shopping the plan to lawmakers on the Hill currently, and in recent days the idea of it seems to have attracted bipartisan approval. President Bush, who will be in office until January, could try to go out on a positive note by putting this plan into action swiftly.

Today's market was wildly volatile and despite the last minute surge, it's still too early to call a bottom. Indeed, the fallout from Lehman Brothers and A.I.G. is only starting to be felt among already struggling financial institutions around the globe. And the problems facing Goldman Sachs and Morgan Stanley will likely continue for the coming days and weeks. Shares of Morgan rebounded to close up slightly today, while Goldman ended the session down nearly 4 percent. The broader financial sector soared.  

The Dow swung from a 148-point loss to a gain of as much as 465 points before settling down to close the session up 410 points, or 3.9 percent.

• Wall Fall Down: Who Will Survive the Panic?
• Credit Crunched: A Special Report on the Crisis
• One Market Is Holding Up ... So Far