Washington  - US Treasury Secretary Henry Paulson on Friday said it would take a massive government intervention of "hundreds of billions" of dollars to prevent a total collapse of the financial sector in the United States.

Paulson said he would be working with Congress over the weekend on legislation that would allow the government to buy up banks' mortgage-related assets, which have plummeted in value and are at the centre of the current financial turmoil.

The unprecedented, comprehensive government intervention was the only way to prevent a much greater fallout into the wider US economy, Paulson said. Credit availability to US consumers has seized up in recent months as banks dealt with their shaky balance sheets.

"I am convinced this bold approach will cost American families far less than the alternative," Paulson said. "The financial security of all Americans ... depends on our ability to restore our financial institutions to sound footing."

Paulson revealed few exact details of the plan, which would essentially involve creating a new government agency that could soak up all the bad assets that are bringing down US financial firms.

The Treasury secretary said the rescue package had to be "big enough to make a real difference" and estimated the cost in the "hundreds of billions of dollars."

Comprehensive legislation could be adopted in the coming week. In the meantime, Paulson said Fannie Mae and Freddie Mac would begin buying up mortgage-backed securities. The two government-chartered mortgage giants were taken control of by the Federal Reserve last week.

The Treasury earlier Friday announced a 50-billion-dollar guarantee programme for money-market mutual funds as panicked account holders started withdrawing their investments.

Paulson and Fed Chairman Ben Bernanke met with congressional leaders Thursday night to iron out the details of a possible rescue plan. (dpa)