PHILADELPHIA (Reuters) - U.S. presidential candidate Barack Obama on Friday welcomed a plan by Treasury Secretary Henry Paulson to buy equity in financial institutions if necessary to halt market turmoil.

"There are many causes of this economic crisis, and it's critical that we respond using all the tools that we currently have," Obama said in a statement.

"That's why I support Secretary Paulson's latest initiative to use the authority we gave him in the financial rescue plan to provide more capital to our financial institutions so that they have money to lend to families and businesses," the Illinois Democratic senator added.

Paulson said the program aims to encourage the raising of new private capital to complement the public capital injections. It would use authority created by the $700 billion financial rescue package that Congress passed last week.

Earlier on Friday in Columbus, Ohio, Obama said that the Federal Reserve and Treasury have the tools they need to address the deepening financial crisis.

But he added that it was crucial that policymakers use them immediately to try to calm the panic selling that has led to huge losses in global markets.

Obama said the Paulson plan should be implemented "quickly, aggressively, and ensure that it protects taxpayers, does not reward CEOs, and is limited in duration."

The Democratic White House contender said that as market conditions evolve, the government should be ready to take further steps to boost investor confidence, such as extending guarantees.

"And the United States must step up its efforts to work with the G-7 (Group of Seven) and our other allies to ensure a globally coordinated solution," he said.

(Reporting by Caren Bohan; Editing by Eric Walsh)