U.S. poised to buy bank equity over financial crisis: Paulson+

WASHINGTON, Oct. 10 Kyodo - U.S. Treasury Secretary Henry Paulson said Friday the U.S. government will press ahead with a plan to buy equity in ailing financial institutions ''as soon as we can'' in a desperate effort to contain the financial mayhem that has been rocking not only the United States but also the global economy.

''We are developing strategies to use the authority to purchase and insure
mortgage assets and to purchase equity in financial institutions, as deemed
necessary to promote financial market stability,'' he said at a news conference
after one-day Group of Seven financial leaders' talks.
''We're going to do it as soon as we can do it and do it effectively and
right,'' Paulson said. ''Trust me, we are not wasting time -- people are
working around the clock to deal with this.''
He made the remarks after President George W. Bush earlier in the day vowed
further efforts to mobilize all the tools available, including capital
infusions into financial institutions, by using the recently enacted $700
billion financial rescue program.
The United States had until very recently been reluctant to directly invest in
financial institutions unable to raise funds from private investors, and
instead focused solely on buying up troubled assets from them.
But with financial markets continuing to be panicky, Washington had to tilt
toward the idea of tapping taxpayer money to restore financial market stability
and prevent the U.S. economy from worse suffering.
The United States would be following Britain, which plans to help faltering
banks with public money. Britain is pursuing a 50 billion pound ($87 billion)
program that in part puts several banks under state control.
According to U.S. media, the Bush administration is expected to conduct capital
injections as early as by the end of this month, including ones into sound
financial institutions.
Other policy responses reportedly under consideration include guaranteeing
billions of dollars in bank debt and temporarily insuring all bank deposits.
Paulson said his department is ''working to develop a standardized program that
is open to a broad array of financial institutions,'' noting such a program is
the best way to ''use taxpayer dollars more efficiently and have it go
farther.''
Paulson said he ''briefed my (G-7) colleagues on the work we are pursuing to
implement swiftly and thoughtfully the new financial rescue package,''
including the stock purchase plan.
The G-7 finance ministers and central bank governors adopted their action plan,
agreeing to ensure that major financial intermediaries ''can raise capital from
public and as well as private sources'' as needed to permit them to continue
lending to households and businesses.
Paulson declined to offer an estimate of how much of the $700 billion program
will be used to buy up troubled assets and how much will be used to purchase
equity in financial institutions.
''I'm not prepared to say today about the relative sizes of the two efforts,''
he said in response to a question about the amount of money that will be spent
on buying assets relative to the amount for equity.
The ongoing crisis erupted in August last year from the U.S. subprime mortgage
meltdown and has since forced financial institutions to write off tens of
billions of dollars in related losses and has dampened global economic growth.
Paulson said financial market volatility will continue for a little longer but
that the G-7 action plan should bring investor confidence back to normalcy.
''There is every reason for people around the world to be confident,'' he said.
The G-7 brings together Britain, Canada, France, Germany, Italy, Japan and the
United States.