The US Federal Reserve has promised to provide enough funds to keep the financial system working normally, after it backed emergency funding for investment giant Bear Stearns.
The US central bank confirmed an arrangement in which it would provide credit to the Wall Street firm, which said its financial position was deteriorating, through banking group JP Morgan Chase.
News of the bail-out sent US and European stock markets sharply lower this afternoon.
JPMorgan Chase said it was working closely with Bear Stearns on securing permanent financing or other alternatives for the bank, which has been battered by a global credit crunch and the US housing slump.
The Wall Street investment bank has sustained hundreds of millions of dollars in losses in the mortgage-related credit crisis that erupted in mid-2007.
Bear Stearns confirmed that it has agreed to a secured loan facility for up to 28 days with JPMorgan Chase. The company said it was in talks with JPMorgan about permanent financing or other alternatives. The company said its liquidity position had 'significantly deteriorated' in the last 24 hours, amid market rumours about its financial position.
