Paulson quickens action plan on Europe's move to save firms

Treasury Secretary Henry Paulson is speeding up consideration of guaranteeing debt issued by banks after a similar move by European policymakers, according to a US official briefed on the matter.

Such a step is under active discussion as part of a three-pronged effort to unblock credit markets, said the official, who spoke on condition of anonymity. Paulson already plans to buy stocks in financial companies and invest in distressed assets under the $700 billion program approved by Congress this month.

The Treasury chief may have to offer a backstop for US banks' debt to keep a level playing field for American lenders in the wake of Sunday's decision by European leaders. Policy makers are acting after the cost to protect corporate debt from default soared to record levels last week.