UNITED States President George W. Bush yesterday announced a US$250-billion government plan to directly buy shares in the nation's leading banks, saying the drastic steps were "not intended to take over the free market but to preserve it."

Nine major banks will participate initially, including all of the country's largest institutions, he said, in a move that sent stocks soaring on Wall Street.

Some of the nation's largest banks had to be pressured to participate by Treasury Secretary Henry Paulson, who wanted healthy institutions that did not necessarily need capital from the government to go first as a way of removing any stigma that might be associated with banks getting bailouts.

"We regret having to take these actions," Paulson said. "Today's actions are not what we ever wanted to do ?? but today's actions are what we must do to restore confidence to our financial system."

It was the latest in a long series of moves taken by the administration and the Federal Reserve over the past several weeks to prop up a weakening financial industry. The economic picture in the United States had been darkening for months, but the slump took on new urgency - and had greater global repercussions - amid record-setting sell-offs on Wall Street and enactment of a US$700 billion bailout bill.

Under the new multifaceted stabilization program described yesterday, the government will initially buy stocks in nine major US banks. When financial markets stabilize and recover, the banks are expected to buy the stock back from the government, Bush said in brief remarks from the White House Rose Garden.

"These efforts are designed to directly benefit the American people by stabilizing the financial system and helping the economy recover," he said.

Paulson told a Treasury Department news conference that the aggressive government intervention was "what we must do to restore confidence in our financial system."

The Federal Reserve, meanwhile, announced that it will begin buying vast amounts of short-term debt on October 27, its latest effort to break through a credit clog. The Fed is invoking Depression-era emergency powers to buy commercial paper, a crucial short-term funding that many companies rely on to pay their workers and buy supplies.

Last week the Fed said it intended to take the action but didn't specify when. Fed Chairman Ben Bernanke welcomed all the new steps and said he believes they will help ease problems plaguing financial markets and threatening the economy. However, he also made clear that policy makers would continue to take actions as needed to battle the crisis.

"Our strategy will continue to evolve and be refined as we adapt to new developments and the inevitable setbacks," he said. "But we will not stand down until we have achieved our goals of repairing and reforming our financial system and thereby restoring prosperity to our economy."

"The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it," Paulson said, meaning that they will use the money to bolster lending to each other and to their customers.

"Government owning a stake in any private US company is objectionable to most Americans - me included," he added. "Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable."

Bush said that by restoring confidence in the system, the hope is to "return our economy back to the road of growth and prosperity."

He said that the efforts to rescue the nation's battered financial sector was a short-term move to help banks to be able to begin lending again.