With markets on edge, Fed takes urgent action to calm investors

The rapid-fire announcements late in the day were timed to beat the opening of Asian financial markets and to assuage worries that investors, lenders and traders shell-shocked by the housing debacle and credit crunch would hunker down even more and drive markets lower.

In a sign of the high level of concern, Fed Chairman Ben S. Bernanke joined a telephone conference call with reporters Sunday -- a call that in itself was a break with tradition -- to announce the central bank's moves. The most exceptional, the opening up of direct lending to major non-bank investment companies, required a vote Sunday by the Board of Governors confirming that "unusual and exigent circumstances" existed.

But the actions failed to stop the slide in the dollar, which plunged to a 12-year low of 96.75 Japanese yen in Asian trading late today, from 99.21 on Friday. Asian stock markets also tumbled, with the Nikkei-225 index in Tokyo closing down 3.7%. In Sunday's hastily negotiated sale, once-vaunted Bear Stearns was valued at just $236 million, or a mere $2 a share -- 93% off its closing price Friday. Bear Stearns' stock peaked at $170 early last year.

For Bear Stearns, a major force in sub-prime mortgage lending, the speed and ferocity of the fall underscored the depth of a crisis that threatens the financial system.

"It's amazing that a firm with a storied history that has been respected for all these years has within two weeks literally gone from solvent to insolvent," said Larry Tabb, head of a financial markets consulting firm in Westborough, Mass. "It's scary and it's horrible."

Bear Stearns' breakdown was in part a function of investors' growing unwillingness to buy even high-quality mortgage-backed securities as the housing debacle worsened. That further depressed the value of mortgage bonds in recent weeks and triggered declines in other financial markets.

The Dow Jones industrial average has slumped 9.9% year to date, and at 11,951 on Friday was down 15.6% from its record high reached in October.

"This is a flight out of financial assets," said Gary Schlossberg, senior economist at Wells Fargo & Co. in San Francisco.