U.S. firms up plan to buy into banks to stem crisis

By Emily Kaiser and Claudia Parsons

WASHINGTON (Reuters) - The U.S. government pushed on Saturday to finish a plan to buy direct stakes in American banks as finance ministers from around the world struggled to find ways to stop the deepening financial crisis and shore up markets.

Treasury Secretary Henry Paulson said the U.S. government would buy shares of financial institutions if necessary to halt market turmoil that has wiped out trillions of dollars of wealth and threatens to throw the global economy into major recession.

"We're going to do it as we can do it in a proper way that will be effective. Trust me, we're not wasting time, we're working around the clock," Paulson said late on Friday after a meeting of finance ministers from the Group of Seven rich countries in Washington.

The G7 vowed to take all necessary steps to unfreeze credit markets and ensure banks can raise money, but offered no collective course of action to solve the 14-month-old debt crisis, which has worsened dramatically in recent weeks.

The finance leaders agreed to use all available tools to support "systemically important" financial institutions and prevent their failure, and ensure banks can raise capital "in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses."

Financial markets needed time to fully digest all the steps various countries have taken so far in response to the crisis, European Central Bank President Jean-Claude Trichet said.

But analysts said the G7 statement was unlikely to allay the panic that has swept through global markets in recent weeks after U.S. investment bank Lehman Brothers tumbled into bankruptcy and triggered a wave of risk aversion that left banks hoarding cash.

"Right now, everybody's scared, they're panicking," said Mark Waggoner, president of Excel Futures Inc in California. "Unless they see action, they're still going to panic.