The American administration is not only putting big money in buying up assets of distressed financial institutions, it is also considering investing heavily in their equities. In fact, that is an approach which has been propounded by several experts as more conducive to the general well-being of the country's economy as well as the institutions themselves, rather than merely spending public money on assets that have lost much of their value over the last year.

Some critics of the proposals for buying soured mortgage-related products have said the process would take so long that it would reduce its efficiency, whereas a capital injection through share purchases would immediately put more cash for lending into the banking system.

Yesterday, US treasury secretary Henry Paulson said the administration will buy equity ''as soon as we can'' in banks and other financial institutions to restore market stability and revive economic growth. Speaking at a press conference after a meeting in Washington of finance ministers and central bankers from Group of Seven countries, he said that the Treasury is ''working to develop a standardized program that is open to a broad array of financial institutions.''

Paulson said the equity purchases would be made alongside purchases of distressed assets as a way to recapitalize US banks and other institutions reeling from soured mortgages and illiquid securities. The Treasury will use authority granted by Congress in last week's $700 billion financial rescue legislation to buy largely nonvoting common or preferred shares. Paulson said the two-pronged approach would more effectively recapitalize banks. (See: Paulson Plan II: Will it work?)

''We can use the taxpayers' money more effectively and more efficiently, have it go farther and get more for their dollars and more protection if we develop a standardized program for making and encouraging equity participation,'' he said, of an approach that, resembles in parts, the one announced by the British government recently. (See: Britain unveils $906-billion bailout plan for banks)

Remarking on the urgency of the situation, he assured, ''We're going to do it as soon as we can do it and do it properly and do it effectively and right…. Trust me, we are not wasting time; people are working around the clock to deal with this.'' However, he declined to discuss the size of the US bank equity purchases relative to the amount of asset purchases it plans.

''As we develop plans to purchase equity, as in the approach we are taking to broad mortgage-asset purchases, we are working to develop a standardized program that is open to a broad array of financial institutions,'' Paulson said in a statement. ''Such a program would be designed to encourage the raising of new private capital to complement public capital. Consistent with the legislation, any equity the government purchases through a broadly available equity program would be on a nonvoting basis, except with respect to the market standard terms to protect our rights as investors.''

Paulson also said the G7 central bank governors and finance ministers "finalized an aggressive action plan" to address financial market turmoil by coordinating individual and joint policy moves to provide liquidity to markets, strengthen financial institutions, protect savers and enforce investor protections.

He said it was critical for governments to continue to take both individual and collective actions to stabilize markets and restore confidence in the financial system, before admitting that the country's economy was ''facing a prolonged period of uncertainty and our financial markets are experiencing unprecedented and extraordinary challenges.''