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Paulson calls rescue plan "major step": report

(Reuters) - The rescue plan unveiled by the United States to protect the nation’s banks represents “a major step toward stabilizing the system,” U.S. Treasury Secretary Henry Paulson told the Financial Times in an interview.

The United States ushered in a new era in banking on Tuesday with plans to take equity stakes totaling up to $250 billion in financial institutions, an incursion into the private sector that U.S. officials called a regrettable last resort.

“We have clearly got more room to inject more capital and more capital will need to be injected over time using the variety of tools at our disposal,” Paulson told the paper.

He also said he would not claim the action marked “an end to financial stress,” adding that the effects of the intervention would “clearly take time to work through.”

Until the passage of the rescue legislation earlier this month, U.S. authorities had been forced to act on a “case by case basis” using inadequate mandates, Paulson said.

He told the paper that the United States was pressing ahead in parallel with its plan to buy troubled mortgage-related assets, which he said would “dovetail and fit very well with what we are doing in terms of equity purchases.”

Paulson said it was a mistake to think of the two measures as rival strategies when both were intended to deal with the problem of inadequate capital, according to the paper.

Reporting by Ajay Kamalakaran in Bangalore; Editing by Kazunori Takada

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