The U.S. government will spend $250 billion US to buy shares in some of the country's banks, President George W. Bush announced Tuesday, in a move designed to boost confidence in the distressed American financial services sector.

The proposal, part of the comprehensive package to help the ailing U.S. financial sector, marks a partial U-turn by Washington and comes in the wake of a similar move by the U.K. to invest cash in its own distressed financial institutions.

"This is an essential short-term measure to ensure the viability of America's banking system," Bush said Tuesday morning. "And the program is carefully designed to encourage banks to buy these shares back from the government when the markets stabilize and they can raise capital from private investors."

Nine of the country's biggest banks have already agreed to take money for equity in their corporations.

Previously, Washington had resisted the notion of owning a stake in private sector companies, opting instead for a $700 billion plan to purchase the nearly-worthless asset-backed commercial paper currently sitting on the balance sheets of a large number of financial institutions.

On Monday, however, U.K. Prime Minister Gordon Brown said his government would spend $75 billion US to buy equity in that country's three biggest banks.

The American rescue plan comes after the G-8 countries, including Canada, met over the weekend to discuss how to boost global economic prospects and equity markets in the United States and Europe.

Financial turmoil

Since the beginning of September, bankruptcies and takeovers among financial institutions have marked an unprecedented period of economic upheaval as global pools of credit have shrunk with lenders unwilling to dole out cash to potential borrowers, whether corporations or individuals.

Government policies in Canada, Europe and the United States have been aimed at increasing the pool of cash for borrowing and giving banks and other financial companies the confidence that their loans have a good chance of being repaid.

Besides the share purchase proposal, Washington also plans to guarantee all non-interest bearing deposits held at American banks.

Even as the government has been mulling various ideas about helping U.S. banks, other U.S. lenders have been closing their doors.

Last week, for example, the Meridian Bank in Eldred, Ill., and Main Street Bank in Northville, Mich., were taken over by other banks in moves approved by the U.S. Federal Deposit Insurance Corporation.