U.S. planning to buy equity in financial institutions

WASHINGTON (Reuters) - Treasury Secretary Henry Paulson said on Friday the United States was developing plans to buy equity in financial institutions if necessary to halt market turmoil.

"We are working to develop a standardized program that is open to a broad array of financial institutions," he said in a statement after a meeting of top economic officials of the Group of Seven major industrialized nations.

Paulson said the program aims to encourage the raising of new private capital to complement the public capital injections. It would use authority created by a broad financial rescue package that Congress passed last week,

"Consistent with the legislation, any equity the government purchases through a broadly available equity program would be on a non-voting basis, except with respect to the market-standard terms to protect our rights as investors," Paulson said.

Paulson said the G7 central bank governors and finance ministers "finalized an aggressive action plan to address the turmoil in global financial markets and the stresses on our financial institutions. This action plan provides 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."

Paulson 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.

Paulson said that to make sure the actions of one country do not come at the expense of others or the system as a whole, the G7 finance leaders will stay in close contact as they move forward with their responses to the crisis.

He said the U.S. economy was "facing a prolonged period of uncertainty and our financial markets are experiencing unprecedented and extraordinary challenges."

(Reporting by David Lawder and Mark Felsenthal, Editing by Chizu Nomiyama)