The federal government on Tuesday unveiled a sweeping plan to invest up to $250 billion in equity into U.S. banks, among other measures intended to shore up the debilitating crisis of confidence that has seized credit markets and sent equities plummeting.

Treasury Secretary Henry Paulson said nine major financial institutions have already agreed to participate in the voluntary program in which Treasury will buy preferred shares through funds raised the $700 billion bailout package Congress recently passed.

The same institutions also have agreed to a plan in which the Federal Deposit Insurance Corp. will temporarily guarantee the senior debt of all federally insured institutions and their holding companies, as well as deposits in non-interest bearing deposit transaction accounts in exchange for a greater supervision.

"This is an essential short-term measure to ensure the stability of the U.S. banking system," President George Bush said in a Tuesday morning press conference.

Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair unveiled the measure in a separate press conference in Washington, D.C.

"These steps will ensure that the U.S. financial system performs its vital role of providing credit to households and businesses and protecting savings and investments in a manner that promotes strong economic growth in the U.S. and around the world," they said in a joint statement. "The overwhelming majority of banks in the U.S. are strong and well-capitalized. These actions will bolster public confidence in our system to restore and stabilize liquidity necessary to support economic growth."

The government is set to buy preferred equity stakes in Goldman Sachs (STOCK QUOTE: GS), Morgan Stanley (STOCK QUOTE: MS), JPMorgan Chase (STOCK QUOTE: JPM) , Bank of America (STOCK QUOTE: BAC) -- including the soon-to-be acquired Merrill Lynch (STOCK QUOTE: MER) -- Citigroup (STOCK QUOTE: C), Wells Fargo (STOCK QUOTE: WFC), Bank of New York Mellon (STOCK QUOTE: BK) and State Street (STOCK QUOTE: STT), the Wall Street Journal reports, citing people familiar with the matter.

Bloomberg reports the Treasury plans to spend $25 billion each for stakes in Citigroup and JPMorgan. Another $25 billion will be divided between Bank of America and Merrill, which agreed last month to be acquired by Bank of America. Wells Fargo is to get at least $20 billion, Goldman and Morgan Stanley will each get $10 billion, and State Street and Bank of New York will get about $3 billion each.