U.S. Summons Banks to Meeting on Rescue Plan

The Bush administration over the past six weeks has taken over the nation's two biggest mortgage finance firms, Fannie Mae and Freddie Mac, rescued American International Group, the world's biggest insurance company, and won congressional approval of a $700 billion rescue package for the entire financial system.

As the bailout bill rushed through Congress, Paulson stressed that the major aim was to buy bad assets, primarily mortgage-backed securities, from financial institutions. The hope was that taking those bad loans off the books would encourage banks to return to more normal lending operations and unclog credit flows -- the economy's lifeblood.

Paulson said Friday that the government also would use some of the money to buy stakes in banks. The goal is to give banks the resources to resume lending at more normal levels.

That about-face has left the administration trying to decide how much to devote to buying bad assets and how much to use for stock purchases.

Lawmakers who pushed to include the stock purchase program in the rescue bill over initial administration objections say the stock purchases can start much faster than the effort to buy bad assets and help restore market confidence sooner.

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AP reporters Emily Flynn Vencat in London and Tim Paradis in New York contributed to this story.

(Copyright 2008 by The Associated Press. All Rights Reserved.)