Bear Stearns said that it was getting an emergency loan from JPMorgan
Chase in co-ordination with the Federal Reserve Bank of New York [AFP]
The US central bank says it has voted to endorse an arrangement to help Bear Stearns Cos overcome a liquidity crunch.
The Federal Reserve's announcement on Friday came in a statement amid plunging stocks on Wall Street over worries that the plan to ease the US investment giant's woes might not work.
Bear Stearns said earlier that it was getting an emergency loan from JPMorgan Chase in co-ordination with the Federal Reserve Bank of New York.
The Fed statement also pledged "to provide liquidity as necessary to promote the orderly functioning of the financial system".
Bear Stearns has sustained hundreds of millions of dollars in losses in the mortgage-related credit crisis that erupted in mid-2007.
The company said the arrangement was a secured loan facility for up to 28 days and that it was in talks with JPMorgan about permanent financing or other options.
Bear Sterns acknowledged that its liquidity position had "significantly deteriorated" in the last 24 hours, forcing it to seek aid.
"Bear Stearns has been the subject of a multitude of market rumours regarding our liquidity," Alan Schwartz, the company's president and chief executive, said.
"We have tried to confront and dispel these rumours and parse fact from fiction. Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated.
"We took this important step to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations."
JPMorgan Chase said the Fed, through its discount window, would provide its financing.
The bank said it did not believe this transaction exposed its shareholders to "any material risk".