Paulson: U.S. Might Buy Bank Stocks

Treasury Secretary Henry Paulson said Friday that the U.S. government is considering taking equity stakes in financial companies as part of its overall plan to stabilize the markets.

Following a meeting of the Group of Seven finance ministers in Washington, Paulson said the government is trying to formulate a standardized program that would be open to a variety of firms.

"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 in a statement.

The program "would be designed to encourage the raising of new private capital to complement public capital," he added.

Financial companies have been at the center of the turmoil that has distressed global markets for more than a year. In just the past few weeks, the U.S. government has bailed out Fannie Mae (FNM Quote - Cramer on FNM - Stock Picks), Freddie Mac (FRE Quote - Cramer on FRE - Stock Picks) and AIG (AIG Quote - Cramer on AIG - Stock Picks), Goldman Sachs (GS Quote - Cramer on GS - Stock Picks) and Morgan Stanley (MS Quote - Cramer on MS - Stock Picks) have become bank holding companies, Merrill Lynch (MER Quote - Cramer on MER - Stock Picks) has agreed to be acquired by Bank of America (BAC Quote - Cramer on BAC - Stock Picks) and Wachovia (WB Quote - Cramer on WB - Stock Picks) has reached an agreement to merge with Wells Fargo (WFC Quote - Cramer on WFC - Stock Picks).

Additionally, Congress has passed a rescue plan that's meant to provide hundreds of billions of dollars to restore investor confidence in the banking system.

Paulson's statement also said that officials from the G-7 industrialized nations agreed on "a coherent framework that will direct our individual and collective policy steps to provide liquidity to markets, strengthen financial institutions, protect savers and enforce investor protections."