To Democrats, Bush is not doing enough to help

"We're in the most serious economic problem

we've been in in a very long time

The president's hands-off attitude

is reminiscent of Herbert Hoover in 1929,

in 1930," said Charles Schumer [D]

Markets Tumble After Bear Stearns

Rescue Fails to Reassure

Share prices around the world fell sharply today as shockwaves from the collapse of US investment bank Bear Stearns swept through financial markets.

The FTSE 100 tumbled more than 100 points in the opening minutes of trading, falling 107.1 points to 5524.6, and there were share falls in other European markets.

Earlier in Tokyo the Nikkei 225 had ended the day down 3.7% or 454.09 points, its lowest level since August 2005.

The $2 a share JP Morgan takeover of Bear Stearns was put together rapidly over the weekend, with the US authorities keen to tie up a deal before the Asian markets opened.

The US Federal Reserve's quarter point cut in its discount rate – the rate at which banks lend to each other - was also an attempt to calm nerves in the financial system.

But traders remained jittery, with many fearing that Bear Stearns will not be the last casualty of the credit crunch that has gripped the global financial system since last August.

The dollar extended its recent heavy losses, falling to around ¥95.72 at one stage, the lowest level against the Japanese currency since August 1995.

Gold, a traditional safe haven in times of turmoil, jumped $25 to a new peak of $1025.5 and oil reached a new record of $111.80.

Bear Sterns: Sold for just $2 a share

- the bank worth $140bn last week

America's fifth largest bank last night became the biggest casualty so far of the global credit crunch - sold off to a rival at a knockdown $2 a share, a discount of 94% on last week when it was valued at $140bn.

The board of Bear Stearns bank approved the buyout by JP Morgan Chase for $236m after a weekend of frantic negotiations. Had the deal not been done, the bank would almost certainly have gone bankrupt.

Last night the US Federal Reserve cut the rate at which it lends money to banks and made more money available for them to secure short term loans.

George Bush is to meet the chairman of the Federal Reserve Paul Bernanke and the US treasury secretary Henry Paulson today. Paulson said: "The government is prepared to do what it takes to maintain the stability of our financial system. That's our priority."

To Democrats, though, Bush is not doing enough to help. "We're in the most serious economic problem we've been in in a very long time. The president's hands-off attitude is reminiscent of Herbert Hoover in 1929, in 1930," said Senator Charles Schumer, a New York Democrat.

The Bear Stearns chief executive, Alan Schwarz, said: "The past week has been an incredibly difficult time. This transaction represents the best outcome for all of our constituencies based upon the current circumstances."

Before the credit crunch set in, the 85-year-old bank had a market capitalisation of more than $140bn. But an evaporation in confidence culminated in a bank run by clients last week.

Senior management rushed to negotiate a takeover before the start of the week's trading on Asian markets to avert mass withdrawals of funds by clients in Japan, China and elsewhere.

Fearful that a bank collapse could cause reverberations around the financial system, the US Federal Reserve is standing behind the deal with $30bn of special financing to fund Bear Stearns' less liquid assets - the first time the central bank has bailed out a brokerage firm since the 1920s.

JP Morgan's chief executive, Jamie Dimon, said the tie-up meant customers could once again "feel secure" in the institution's financial viability.

On Sunday morning talk shows, Paulson said the right decision had been made: "On the one hand, you've got moral hazard, and on the other you've got what's right for the markets, what's right for the stability of the financial system and the US economy."

Rival investment banks are anxious to disassociate themselves from the plight of Bear Stearns, newly nicknamed "bad news Bear". But several will reveal problems of their own this week.

Lehman Brothers saw its shares fall 14% on Friday on news of that it had sought $2bn in fresh financing, and is expected to reveal credit-related losses of $1bn in quarterly earnings tomorrow.

Goldman Sachs has so far profited from the credit crunch, but is set to disclose a $3bn writedown in the declining value of the value of its stake in the Industrial & Commercial Bank of China.