US Treasury Secretary Henry Paulson said the recently approved US financial bailout bill gives him wide authority to inject capital into the banking system and would not rule out having the Treasury take an ownership position in banks if necessary, according to media reports.

"We will use all of the tools we've been given to maximum effectiveness, including strengthening the capitalisation of financial institutions of every size," Mr Paulson told a news conference ahead of tomorrow’s meeting of Group of Seven finance ministers.

His comments came after the UK government acted to rescue its banking system with a mixture of bank recapitalisation and liquidity measures, while central banks around the world cut interest rates.

Mr Paulson declined to directly answer when asked whether the next step for the US might be some similar form of recapitalisation.

"I'm not going to speculate on all the things we may have to do," he said. "I would simply say we have a broad range of authorities and tools...to work with going forward here,” he said, according to Reuters.

The New York Times, quoting unnamed government officials, said the Treasury was considering taking ownership stakes in many US banks. A Treasury spokesperson could not be reached for comment on the story.

Congress last week approved a $700-billion (£405.5 billion) financial rescue package that gives the Treasury power to buy unwanted and illiquid assets from banks that have grown reluctant to lend but also gives it leeway to attempt means of unlocking frozen credit markets as well.