Paulson says rescue plan needed as soon as possible

WASHINGTON (Reuters) - Treasury Secretary Henry Paulson said on Monday a rescue plan for the U.S. financial system was needed as soon as possible and he would work with lawmakers to get one because it was too important to fail.

"We've got much work to do and this is much too important to simply let fail," Paulson told reporters after meeting U.S. President George W. Bush to discuss the House of Representatives' vote against the $700 billion (387 billion pound) rescue plan.

Paulson, who had worked feverishly for days with Democratic and Republican congressional leaders to craft a compromise plan, said he would huddle with them again to develop a plan that works.

"We need to work as quickly as possible," he said, after the Dow Jones industrial average closed down almost 7 percent, falling 777 points, while the Nasdaq plummeted almost 200 points, or more than 9 percent.

"We've experienced significant turmoil in our financial markets in the last few days, including the collapse of Washington Mutual and Wachovia here and the failure of two major financial institutions in Europe," Paulson said.

"Markets around the world are under stress and that reduces the availability of credit that businesses across America depend on to meet payroll and to purchase inventories," he said.

Paulson added that the Treasury, the Federal Reserve and the Securities and Exchange Commission would continue to work to address the problems in the markets and were committed to using all available tools to protect the economy and markets.

"We have significant tools in our tool-kit but they're not sufficient. And so we're going to continue to work with what we have until we get from Congress what we need," he said.

Paulson also said the U.S. banking system was holding up well nonetheless. "Our banking system has been holding up very well, considering all of the pressures."

(Reporting by Jeremy Pelofsky and Matt Spetalnick, editing by Dan Grebler)