"This is a plan I'm quite confident will work," Paulson said during a briefing with reporters Friday evening.
Many of the plan's details will be ironed out during G7 meetings over the weekend.
"We finalized an aggressive plan to stabilize and provide liquidity to markets," Paulson said. "Never has it been more important to find collective solutions."
The Treasury secretary cautioned that none of the initiatives will settle the turbulence in equity markets quickly. "We'll have some volatility for a while," he said. Nevertheless, because of world leaders' coordinated efforts, "There's every reason for people around the world to be confident."
Paulson was asked whether the U.S. government would intervene to prevent the collapse of Morgan Stanley and Goldman Sachs, the two investment banks that recently converted to commercial banks. He said their conversion to commercial bank holding companies, which are overseen by the Federal Reserve Board, gives Washington a clear roadmap for resolving those institutions should federal action be necessary.
Paulson shared a few details about the Treasury's plan to take equity positions in banks.
The U.S. will buy equity stakes in banks and other financial institutions "as soon as we can" to restore market stability and revive economic growth. The Treasury is "working to develop a standardized program that is open to a broad array of financial institutions," Paulson said.
The injection of equity is part of efforts to sustain banks and other financial institutions through the ongoing credit crisis.
- Ron Orol, Donna Block and Bill McConnell.
