Goldman Sachs and Morgan Stanley, the last two major investment banks in the US, have become bank holding companies, a move which will give them easier access to credit and greater protection from the economic crisis.
Goldman Sachs and Morgan Stanley will now be subject to more stringent regulation, limiting the amount of money they can borrow relative to the capital they have and significantly reducing the huge profits they are able to make.
It completes an overhaul of the structure of the banking industry, which had been broken up in the 1930s into commercial and investment banks under rules to restore confidence during the Great Depression.
He said the decision had been "accelerated by market sentiment".
"However, there are a lot of question marks still over this and I think that it is a cautiously optimistic response thus far.
"Some of the stock markets have come off recent highs and [the US] congress is yet to approve this, so I think we'll be watching headlines for the next few days."
It is the US's largest ever interventionist package and will see the US national debt limit raised to $11.3 trillion.
If it is approved, Paulson's decisions will not be reviewable by any court, leading some critics to say this effectively makes the treasury boss a dictator of US financial markets.
"We did this to protect the taxpayer."