US bid to stablise markets

The US government will buy stock in troubled financial institutions in a bid to stabilise the global markets, US Treasury Secretary Hank Paulson said.

International finance ministers, including chancellor Alistair Darling, finalised "an aggressive action plan to address the turmoil in the global financial markets" during their meeting in Washington, Mr Paulson said.

The move came ahead of crisis talks between President George Bush and the G7 ministers - from the US, the UK, France, Germany, Italy, Japan, and Canada - at the White House.

Earlier, a UK government delegation arrived in Reykjavik for talks to try to settle the dispute over the Icelandic government's refusal to guarantee deposits of British savers in the country's failed banks.

Some £1 billion of local authorities' cash as well as billions more from small investors is tied up in Icelandic banks.

In the UK, the FTSE 100 closed below the 4,000 mark for the first time in five years on Friday and, on Wall Street, the Dow Jones industrials average of blue chips firms completed its worst week ever.

The programme to purchase stock in the financial institutions will be open to a broad array of institutions, Mr Paulson said.

He said the ministers were focused on the immediate need to stabilise the financial markets and said it had never been more important to find "collective solutions".

"As we develop plans to purchase equity... we are working to develop a standardised programme that is open to a broad array of financial institutions," he said.

"We are developing strategies to use the authority to purchase and insure mortgage assets, and to purchase equity in financial institutions, as deemed necessary to promote financial market stability."

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