Updated from Monday, Oct. 13

The federal government is planning to unveil new initiatives to address stalled credit markets Tuesday, including a plan to buy equity stakes in banks, according to a published report.

The Wall Street Journal reported that the Bush administration plans to detail new initiatives Tuesday that are meant to help resolve the financial crisis. One component of the program may involve the Treasury Department buying roughly $250 billion worth of equity in banks, the report said, citing people with knowledge of the situation. The funds would come from the $700 billion bailout package Congress recently cleared, the report said.

The U.S. government is expected to take stakes in nine of the nation's top financial institutions as part of a new plan to restore confidence to the battered U.S. banking system, the Journal reports Tuesday.

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

Some of the big banks were unhappy about the government taking equity stakes, but acquiesced under pressure from Treasury Secretary Henry Paulson in a meeting Monday, the Journal reports.

The Journal reports other elements of the plan, which will be announced Tuesday morning, include: equity investments in possibly thousands of other banks; lifting the cap on deposit insurance for certain bank accounts, and guaranteeing certain types of bank lending.

The report comes after Paulson met Monday afternoon with the heads of major U.S. banks to discuss plans to stabilize financial markets. Many top bank executives are already in Washington, D.C. for meetings of the World Bank and International Monetary Fund.

The Journal said expected participants in the meeting included Goldman Sachs CEO Lloyd Blankfein, Morgan Stanley CEO John Mack, Bank of America CEO Ken Lewis, JPMorgan Chase CEO Jamie Dimon and Citigroup CEO Vikram Pandit.

On Monday, the official in charge of the federal government's $700 billion effort to weed out troubled assets clogging credit markets and the U.S. banking system said the Treasury is working quickly to kick-start the program without sacrificing quality. Neel Kashkari, the Treasury's interim assistant secretary for financial stability, said the Troubled Asset Relief Program has begun hiring key staff and is still seeking accounting firms and companies to review proposals and manage assets.

The Treasury has selected the law firm Simpson Thatcher to advise on structuring a program to acquire equity stakes in banks, as well as the consultancy Ennis Knupp to hire asset managers.

" W e have accomplished a great deal in just 10 days, but our work is only beginning," he said in a speech at the Institute of International Bankers. "A program as large and complex as this would normally take months or even years to establish. We don't have months or years. Hence, we are moving to implement the TARP as quickly as possible while working to ensure high quality execution."

Kashkari also said TARP was taking "aggressive steps" to combat potential conflicts of interest, since companies and individuals who can best help the Treasury are also those who will most need its help.

" F irms with the relevant financial expertise may also hold assets that become eligible for sale into the TARP," Kashkari noted.

Firms will be required to submit an outline of any potential conflicts of interest, and the Treasury will then perform its own independent investigation before hiring them. Treasury will only hire firms when "confident in our and their ability to manage any conflicts," Kashkari said.

The TARP will spend up to $700 billion to acquire a wide range of troubled assets that banks have been unable to price or sell, including mortgage-backed securities, as well as whole loans. It will also offer to insure troubled assets or inject capital in exchange for equity stakes in companies. The Treasury is still working on how such capital injections would be structured, though the program will be voluntary. It will also be available to various types of financial firms, both large and small.

Kashkari said there are also provisions in place to protect taxpayers that are footing the TARP bill, including a goal to preserve homeownership, restrictions on executive compensation and strict compliance rules.

Kashkari outlined five key positions the Treasury has already filled, including chief financial officer, chief risk officer, chief of homeownership preservation, chief compliance officer and interim chief investment officer. Those officials have decades of experience in various regulatory arms domestically and abroad, including the Treasury, Federal Deposit Insurance Corp., Federal Reserve, Commerce Department, International Monetary Fund and World Bank, among others.

Treasury is now seeking two accounting firms to oversee compliance, as well as an investment management to review proposals, a master custodian to track assets purchased, and managers for securities and home loans to track those assets.

Kashkari says these solicitations are "just the first wave" in an unprecedented program in size and scope. Those who are selected will require extensive, relevant experience, and firms selected will have to be managing at least $100 billion. "In our view, it would not be fiscally prudent to ask a firm that only manages a couple million dollars to manage a hundred billion dollars," Kashkari said.

Among firms contending for various roles are BlackRock ( BLK), Pacific Investment Management Co., State Street, Bank of New York Mellon and Northern Trust ( NTRS), according to a Bloomberg report last week.