US Treasury Secretary Henry Paulson has proposed an extended financial rescue plan for all banks with large scale operations in the US even as he urged the US Congress to swiftly adopt a $700-billion financial rescue plan for failed US financial institutions.

''We need this to be clean and quick and we need to get it in place," Paulson said in an ABC television interview.

On Friday, the Bush administration had urged Congress to grant the treasury far-reaching emergency powers to buy hundreds of billions of dollars of distressed mortgage securities from the $3.4-trillion money market by creating a $700 billion government-backed investment vehicle.  (See: Bush administration announces $500-billion bailout package)

Paulson said the US was coordinating plans with other countries to forge bailouts for their financial institutions similar to the rescue plan.

"I'm also going to be pressing our colleagues around the world to design similar programmes for their banks and institutions when they are appropriate," Paulson said.

Paulson asked Canada and other Group of Seven industrialised countries to back the sweeping financial relief package to alleviate stresses in the banking system. Paulson said the bailout plan would also cover non-US institutions with operations in the United States.

''We have a global financial system and we are talking very aggressively with other countries around the world and encouraging them to do similar things,'' Paulson said, adding, "And I believe a number of them will."

The proposed US bailout was expanded yesterday to include Canadian and other foreign institutions with "significant operations" in the country, after the scheme was initially restricted to soaking up bad assets from US lenders.

The Congress is expected to pass the US government's bailout package, as the Democrats also seemed to support the plan.

''We have to do something about the mortgage crisis, not just foreclosures but the price of housing, which is affecting everyone on Main Street,'' the influential Democrat senator from New York, Charles Schumer. Told Fox News.

Paulson said the upfront cost of the proposal could easily be $700 billion, trough commentators feel that the figure could swell to $1 trillion although there was no indication of what the government would get in return for the federal assistance.

It was not indicated how the treasury would assign a value to these assets although opinions have come from many sources that the securities could be determined through an auction that could be underwritten by the government, and ultimately sold back to the market.

President Bush, had approved a provisional $50-billion plan to guarantee money-market funds against losses that could emanate from the share price falling below a dollar.

Canadian financial institutions have billions of dollars of illiquid and hard-to-value assets and were set to qualify for relief under the new terms of the bailout plan. Officials from the Canadian ministry of finance were due to participate in a conference call of G7 ministries late last night.

Paulson, a former head of Goldman Sachs, is expected to hire a team of bankers to run a series of reverse auctions and decide what assets to buy at what price and how long to hold them.

"If the financial institution in this country has problems it has the same impact whether it is US or foreign-owned,'' Paulson said.

Rescuing foreign financial institutions without other governments doing their share could be politically contentious since the US is not asking other countries to contribute to the bailout fund, sources pointed out.

G7 ministers have indicated greater flexibility in considering further co-ordinated intervention following the appeals from Washington.

The Bank of Canada last week played its part in a $180-billion injection of liquidity into money markets, led by the Federal Reserve.

The Bank of Japan on Monday injected another 1.5 trillion yen ($14 billion) into money markets as stocks in Japan opened sharply higher. The Japanese central bank injected 11 trillion yen into the system last week.

The Securities and Exchange Commission in concurrence with the UK's Financial Services Authority, had also banned short selling in 799 financial stocks for the next 10 days since millions of Americans have their pension and savings in the money-market funds.

Short sales are essentially a bet that a company's stock will go lower but some unscrupulous short-sellers spread rumors and misleading  information push prices down. Short selling has been blamed for accelerating the plunge in stock prices of financial institutions.

Others say short selling provides liquidity in the market and helps control valuation of stocks.