The United States is developing plans to buy equity stakes in financial institutions, providing another weapon in its war against financial market turmoil, U.S. Treasury Secretary Henry Paulson said on Friday.

Providing the first confirmation of the plan after a meeting of Group of Seven finance chiefs, Paulson said the equity purchases would be made alongside purchases of distressed assets as a way to recapitalize U.S. banks and other institutions reeling from soured mortgages and illiquid securities.

The Treasury will use authority granted by Congress in last week's $700 billion financial rescue legislation to buy largely nonvoting common or preferred shares. Paulson said the two-pronged approach would more effectively recapitalize banks.

"We can use the taxpayers' money more effectively and more efficiently, have it go farther and get more for their dollars and more protection if we develop a standardized program for making and encouraging equity participation," he said.

US investment bank Morgan Stanley was again under fire on Wall Street on Friday, making it a candidate for a recapitalization from the US government, analysts said.

Shares in the group, one of only two independent investment banks left on Wall Street, have lost 66 percent of their value in the last week.

The future of the bank had looked secure after Japanese peer Mitsubishi UFJ Financial Group (MUFG) said it would buy nearly a quarter of the company for 9.0 billion dollars thereby injecting much-needed capital.

The deal received a greenlight from US federal authorities on Monday and could be concluded next Tuesday after a mandatory legal delay.

But the stock is under so much pressure that investors are speculating that MUFG might pull out of the deal despite its assurances to the contrary.

Shares in Morgan Stanley were down 41.85 percent in New York at 7.24 dollars in early afternooon trading.

Brazil, Argentina, Mexico and other Latin American economies are being hammered by the global financial crisis, with battered stocks and currencies hitting multi-year lows.

Friday saw the region's major equity indices deepen week-long losses.

Latin America's biggest stock market, in the Brazilian city of Sao Paulo, closed down 3.97 percent at 35,609 points, its lowest level in over two years.

At one point during Friday's session, losses went below 10 percent, triggering an automatic trading suspension -- a very rare occurrence that happened three times this week.

The Brazilian currency, the real, has also tumbled, losing a third of its value in the past two months. On Friday it was trading at 2.33 to the dollar.

Mexico's bourse also closed lower, the BMV index down 1.99 percent at 404.93 points after a volatile day.

General Motors has had talks with smaller rival Chrysler LLC about a merger that would combine the No. 1 and No. 3 American automakers at a time when both are struggling to cut costs and shore up cash, according to a source briefed on the matter.

Separately, Ford Motor Co, plans to sell its shares from its controlling stake in Japan's Mazda Motor Co, a second source said.

Finally, Barron's reported that GM was preparing to approach the U.S. Federal Reserve about borrowing money from the central bank's discount window because of the logjam in credit markets that has shut it out of other kinds of borrowing.

The moves come as all three Detroit-based automakers are struggling with a plunge in U.S. sales to 15-year lows and facing tough questions from investors and creditors about whether they have the cash to ride out a deepening downturn.

Representatives of Cerberus Capital Management, the private equity firm that owns an 80.1-percent stake in Chrysler, were not immediately available for comment.

Chrysler and GM declined comment. Ford representatives could also not be immediately reached.

A piece of paper that President Bush signed Thursday helps ease his way out of the White House when his term ends and clears the way for his successor.

For seven years and nearly nine months, he has signed virtually every memo or order or piece of legislation imaginable. He even vetoed a few bills, but the directive he put his name on Thursday was one that few talk very much about. Basically, it's the executive order that turns the keys to the White House over to whomever is elected president on Nov. 4.

A little publicized truth is that Washington can't wait until inauguration day next Jan. 20 to figure out the details of a transition to a new presidency. Both Barack Obama and John McCain already have designated officials to oversee such a transition once the outcome of the election is known. The transition team of the winning candidate will set up procedures for selecting key personnel and making policy decisions in the 11 weeks between the new president takes office.

Congress has appropriated $8 million to finance transition operations.

A runaway train of a sell-off turned the anniversary of the stock market peak into one of the worst days in Wall Street history Thursday, driving the Dow Jones industrials down a breathtaking 679 points and deepening a financial crisis that has defied all efforts to stop it.

Stocks lost more than 7 percent, $872 billion of investments evaporated, and the Dow fell to 8,579. When the average crashed through the 9,000 level for the first time in five years in the final hour of trading, sellers had only begun to hit the gas pedal.

As bad as the day was, even worse was the cumulative effect of a historic run of declines: The Dow suffered a triple-digit loss for the sixth day in a row, a first, and the average dropped for the seventh day in a row, a losing streak not seen since 2002.

The situation in Afghanistan now is the worst since the U.S.-led invasion of 2001 and the country is in danger of a "downward spiral" into violence and chaos, according to an intelligence report draft.

The nearly completed National Intelligence Estimate, the work of 16 intelligence agencies, says Afghanistan's deterioration has accelerated alarmingly in past two months. Bush administration officials say privately that Afghanistan is now the single most pressing security threat in the fight against terrorism.

"We are doing a review to look to see what more we can do," Secretary of State Condoleezza Rice told reporters Thursday. "We are looking to see where some of the strengths are and how we can support those strengths and also how we can help the Afghans when there are weaknesses."

A senior U.S. commander with recent experience in Afghanistan characterized the situation as "stagnant" rather than deteriorating.