THE Bush administration plans to spend as much as US$250 billion of the US$700 billion bailout buying stock in private banks, greatly expanding protections for the US financial system out of deep unease over the faltering economy, industry and government officials said last night. President George W. Bush planned to announce details this morning.

Agreement on the plan came after a remarkable US Treasury Department meeting between top government economic officials and executives of the nation's largest banks to revamp the most costly financial rescue in the nation's history.

The plan also would provide a way for the government to insure loans that banks make to each other, a critical part of the credit system that has become frozen and put many businesses in peril.

Earlier Monday, stocks soared around the world in response to dramatic government economic relief efforts in the United States and elsewhere and the possibility of the even bolder American action.

Last night, the Treasury Department said the administration had decided on "comprehensive actions" to bolster public confidence in the nation's financial system. Bush was to be briefed early Tuesday by economic advisers and then announce the plan, which Treasury said was designed to "restore functioning of our credit markets."

While the administration refused to provide details in advance, two officials with knowledge of the plan said it would include billions of dollars in spending by the government to buy stock in banks as a way of providing desperately needed money so they could resume more normal lending. Both officials spoke on condition of anonymity because the details were yet to be formally released.

The administration will use US$250 billion of the bailout program recently passed by Congress to buy into US banks, the officials said. The government initially will purchase stock of nine large banks, but the program is expected to be expanded to many others. Among the initial banks participating will be all of the country's largest institutions, including Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co, Bank of America Corp. and Morgan Stanley, said one official, who added that administration briefers did not provide any amounts that would be received by individual banks.

The administration expects to spend the US$250 billion buying bank stock before the end of this year, this official said. Bush will certify today that another US$100 billion is needed from the US$700 billion rescue program. That would leave the final US$350 billion to be spent.

In addition to the stock purchases, the Federal Deposit Insurance Corp. will temporarily provide insurance for loans between banks, charging the banks a premium for doing so.

This FDIC program would take the form of providing insurance for new "senior preferred" debt that one bank would lend to another. This debt would be insured by the FDIC for three years, helping to unlock bank-to-bank lending, which has fallen dramatically because of fears about repayment in the face of billions of dollars of bank losses because of bad loans, primarily in mortgages.

The officials said the FDIC would remove for a period the current US$250,000 limit on FDIC insurance on bank deposits for noninterest-bearing accounts. This would benefit primarily businesses who use noninterest-bearing accounts to run their businesses. That money would now be insured, removing the need for these businesses to juggle funds among multiple bank accounts to stay under the US$250,000 limit.

Congress as part of the bailout bill temporarily boosted the deposit insurance cap from US$100,000 to US$250,000.

The administration's proposals were explained during a meeting at the Treasury Department that had been called by Treasury Secretary Henry Paulson and included the top executives of the largest banks in the country. Federal Reserve Chairman Ben Bernanke also participated.

The new approach by the US government is modeled after parts of the strong initiatives in Europe, where governments put US$2.3 trillion on the line Monday in guarantees and other emergency measures to save banks there.

The US$700 billion rescue program that Congress passed on Oct. 3 will continue to feature the purchase by the government of banks' bad assets but will now devote a significant part of the effort to direct government buys of stock in banks, an idea that Paulson suggested only last week.

Major stock markets around the world surged higher, after plunging ever lower last week, as traders began to hear of Europe's actions and the possibility of further steps in the United States.

On Wall Street, a record 936-point increase in the Dow Jones industrials average far surpassed the previous one-day mark of 499 points, set in the waning days of the dot-com boom in 2000. The surge came after the staggering losses of the worst week ever, however, and economists said more rough days can be expected. European markets rallied following Asia's lead in response to the widespread government initiatives.

"These are tough times for our economies, yet we can be confident that we can work our way through these challenges, and America will continue to work closely with the other nations to coordinate our response to this global financial crisis," Bush said after a meeting at the White House with Italian Prime Minister Silvio Berlusconi.

During the weekend, Paulson had called the chief executive officers of the five biggest US banks to come to Washington for face-to-face talks about the rescue plan, according to people briefed on the matter.